clear
Sunday September 23rd, 2018 1:02AM

Bank execs sing praises of new tax law as windfall looms

By The Associated Press
Related Articles
  Contact Editor

NEW YORK (AP) — Two of the nation's biggest banks — JPMorgan Chase and Wells Fargo — indicated Friday that they expect to see significant future benefits from the recently enacted GOP tax bill, through both lower taxes and increased business.

The comments came as the two companies reported their quarterly results, which were both heavily impacted by the change in tax laws, but in different ways. JPMorgan Chase took a $2.4 billion charge tied to the tax bill, while Wells Fargo had a $3.35 billion benefit.

Bank executives and their lobbyists in Washington were big promoters of a corporate tax cut. Banks are among the highest-taxed industries, largely because they operate here in the U.S., and have regularly paid effective tax rates of 30 percent or more. JPMorgan CEO Jamie Dimon and other company executives for years said a lower tax rate would not only be good for JPMorgan, but ultimately good for the country as well.

"The modernization of the U. S. tax code is a significant step forward for the company and a big win for the economy," said Marianne Lake, JPMorgan Chase's chief financial officer, in a conference call with investors.

JPMorgan executives say they expect to pass along some of the benefits, currently in unnamed ways, to consumers, its employees and its shareholders. The bank already raised its minimum wage to $15 an hour before the tax bill passed, but further wage increases could be on the table. Wells Fargo announced shortly after the bill was passed it would raise its minimum wage to $15 an hour as well. Wells Fargo CEO Timothy Sloan said he estimates 70,000 employees at Wells Fargo will benefit during a conference call with investors.

The tax department of JPMorgan has been "working around the clock for many months leading up to the passage" of the tax bill, Lake said, calling the bill "extraordinarily complicated." Lake and executives at other banks are still assessing the law's full impact, however.

But before JPMorgan can benefit from the new tax law, it had to take a significant one-time charge.

Like many banks after the 2008 financial crisis, JPMorgan had billions of dollars of what are known as tax-deferred assets on its balance sheet. These are basically credits it could have used to pay future income taxes. These credits built up after the big Wall Street banks took billions of dollars in losses from bad mortgages and other toxic assets.

Because the new tax bill lowered the corporate tax rate to 21 percent, the value of those tax-deferred assets had to be written down. The $2.4 billion one-time charge covers the change in value of those assets. Other banks, like Bank of America, Citigroup and Goldman Sachs are expected to take similar actions as they report their results over the next couple of weeks.

JPMorgan now expects its effective corporate tax rate to be roughly 20 percent. In comparison, JPMorgan paid an effective tax rate of 28.4 percent in 2016 and a tax rate of 31.9 percent in 2017. The change will save JPMorgan billions of dollars over the coming years. The bank paid $9.8 billion in income taxes in 2016.

Wells Fargo is unique in that it had deferred tax liabilities, not assets, on its balance sheet, basically income taxes it may owe in the future. Wells Fargo some of its $7 billion of deferred tax liabilities and recorded a $3.35 billion gain. Wells Fargo now expects its effective annual tax rate to be around 19 percent.

JPMorgan said Friday it earned $4.23 billion in the fourth quarter, or $1.07 a share, down from $6.73 billion, or $1.71 a share, in the same period a year earlier. Excluding the $2.4 billion charge, the bank would have earned $6.7 billion, or $1.76 a share, which beat analysts' forecasts of $1.69 a share.

Outside of the tax bill, JPMorgan's results were positively impacted by rising interest rates. Being able to charge customers more to borrow helped boost the bank's net interest income by 11 percent to $13.03 billion."

But other parts of JPMorgan's businesses, most notably its trading desks, did not fare as well in the quarter. JPMorgan's trading division reported revenue of $4.4 billion in the quarter, down 22 percent from a year earlier.

Wells Fargo said it earned $6.15 billion in the fourth quarter, or $1.16 per share, versus $5.27 billion, or 96 cents per share, in the same period a year ago. Analysts polled by FactSet had expected Wells Fargo to report a profit of $1.23 a share.

Wells continues to try to shake off the fallout from its 2016 sales practices scandal, and a subsequent scandal in mid-2017 where the bank sold car insurance policies to customers who didn't need it.

While profits in the consumer banking division rose to $3.67 billion compared to $2.73 billion in the same period a year ago, much of that growth was tied to the tax gain that Wells Fargo recorded this quarter. Consumer loans fell to $956.8 billion from $967.6 billion a year earlier, notable in a period when higher economic growth and higher consumer confidence should have translated into more loans issued to consumers. The bank's net interest margin also did not improve in the quarter, despite the Federal Reserve raising interest rates four times in the last year.

Shares of JPMorgan rose 1.7 percent to $112.67. Shares of Wells Fargo fell less than 1 percent to $62.55.

  • Associated Categories: Associated Press (AP), AP Online Headlines - Washington, AP Online Congress News, AP Business, AP Business - Corporate News, AP Business - Industries, AP Business - Financial Services
© Copyright 2018 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
'Mississippi Burning' KKK leader Killen dies in prison at 92
State: Edgar Ray Killen, convicted in 1964 'Mississippi Burning' slayings of 3 civil rights workers, dies in prison.
4:06PM ( 6 minutes ago )
Kentucky is first to get OK for Medicaid work requirement
Kentucky has become the first state to win approval from the Trump administration requiring many of its Medicaid recipients to work to receive coverage
4:03PM ( 9 minutes ago )
Mormon president remembered for devotion to poor, needy
Mormon leaders say deceased church President Thomas S. Monson will be remembered for helping the church grow over more than a half-century and for his devotion to the poor and needy
4:02PM ( 9 minutes ago )
Associated Press (AP)
GOP moderates furious, leaders muted on Trump furor
GOP leaders are mostly staying quiet but more moderate Republicans are reacting sharply against President Donald Trump's incendiary comments about countries in Africa
3:42PM ( 29 minutes ago )
Lawmakers to Justice Department: Keep online gambling legal
Federal lawmakers from both parties in New Jersey are asking the U.S. Justice Department to keep internet gambling legal
3:37PM ( 35 minutes ago )
The Latest: McCain says respect is 'essence' of patriotism
Sen. John McCain says all elected officials, including the president, must respect that people from all over the world have "made America great."
3:28PM ( 43 minutes ago )
AP Online Headlines - Washington
Ex-fighter pilot launches bid to replace Arizona Sen. Flake
Ex-fighter pilot McSally embraces President Trump and his hardline immigration rhetoric as she launches Senate campaign
2:49PM ( 1 hour ago )
Cybersecurity firm: US Senate in Russian hackers' crosshairs
A cybersecurity firm says the same Russian government-aligned hackers who penetrated the Democratic Party have spent the past few months laying the groundwork for an espionage campaign against the U.S. Senate
11:46AM ( 4 hours ago )
New Jersey pols to DOJ: Keep internet gambling legal
Federal lawmakers from both parties in New Jersey are asking the U.S. Justice Department to keep internet gambling legal
11:19AM ( 4 hours ago )
AP Online Congress News
Who'd prefer their country to Trump's US? Norwegians would
President Donald Trump says the U.S. should take in more Norwegians, but that sentiment is unlikely to trigger a rush of immigration from the wealthy Nordic country
3:34PM ( 38 minutes ago )
Spain, UK hold first talks on Brexit's fallout in Gibraltar
Britain and Spain say they held their first informal Brexit-related talks this week in Madrid touching on how future departure accords with the European Union could apply to Gibraltar
3:16PM ( 56 minutes ago )
Stars 'shocked' at gender pay disparity in Hollywood
Stars are sharing their shock at reports of a significant pay disparity between Mark Wahlberg and Michelle Williams for reshoots on the Ridley Scott film "All the Money in the World."
3:08PM ( 1 hour ago )
AP Business
Mudslides claim couple married 50 years, real estate agent
A couple married for more than 50 years and had just celebrated his 89th birthday are among victims of California mudslides
11:52AM ( 4 hours ago )
Holiday gift for retailers; sales up a solid 0.4 percent
US retail sales rose 0.4 percent in December, closing out strong holiday shopping season
11:30AM ( 4 hours ago )
Utility rates under new scrutiny after US corporate tax cuts
Public utility regulators nationwide are re-examining rates that homeowners and businesses pay for electricity and natural gas after a federal tax overhaul signed into law by President Donald Trump reduced the corporate income tax rate by 14 percent
10:42AM ( 5 hours ago )
AP Business - Corporate News
Texas tycoon T. Boone Pickens shutters energy hedge fund
Oil tycoon T. Boone Pickens is closing his Dallas energy-focused hedge fund after what he described as "one hell of a roller coaster ride."
1:09PM ( 3 hours ago )
Core inflation jumped a sharp 0.3 percent in December
Core inflation posted 0.3 percent increase in December, the biggest rise in 11 months
1:04PM ( 3 hours ago )
Trump's first medical checkup as president set for Friday
President Donald Trump will be the patient himself, not the commander in chief comforting them, when he visits the Walter Reed military hospital Friday.
10:16AM ( 5 hours ago )
AP Business - Industries
European Central Bank looks to review stimulus duration
Top officials at the European Central Bank at their last meeting remained wary of prematurely signaling the next steps in an expected exit from their monetary stimulus polices
11:39AM ( 1 day ago )
European Central Bank close to revisiting stimulus program
Top officials at the European Central Bank at their last meeting remained wary of prematurely signaling the next steps in an expected exit from their monetary stimulus polices
9:38AM ( 1 day ago )
Trump lender, other convicted banks get reprieves from feds
Five banks, including a big lender to President Donald Trump, have received temporary reprieves from the administration to run businesses that they otherwise would have had to shut down after criminal convictions
7:21PM ( 1 day ago )
AP Business - Financial Services
'Mississippi Burning' KKK leader Killen dies in prison at 92
State: Edgar Ray Killen, convicted in 1964 'Mississippi Burning' slayings of 3 civil rights workers, dies in prison.
4:06PM ( 6 minutes ago )
Kentucky is first to get OK for Medicaid work requirement
Kentucky has become the first state to win approval from the Trump administration requiring many of its Medicaid recipients to work to receive coverage
4:03PM ( 9 minutes ago )
Mormon president remembered for devotion to poor, needy
Mormon leaders say deceased church President Thomas S. Monson will be remembered for helping the church grow over more than a half-century and for his devotion to the poor and needy
4:02PM ( 9 minutes ago )
Haiti 'shocked and outraged' over reported Trump remarks
Haiti says it is "deeply shocked and outraged" by President Donald Trump's reported remark on immigrants, calling it "racist."
3:57PM ( 14 minutes ago )
Firefighter killed in collapse remembered for humor, spirit
A Philadelphia firefighter fatally injured in a house collapse has been remembered for his sense of humor, his love of his nieces and nephews and his passion for the job
3:54PM ( 18 minutes ago )