Big Banks Would Benefit from the Tax Bill — After an Initial Hit

Updated on
  • Firm’s unremitted overseas earnings facing taxation, CFO says
  • BofA’s Moynihan, Wells’ Sloan tout tax bill’s overall benefits
Greene, McKee on U.S. Tax Reform and Economic Growth

The Republican tax bill is good news for big banks. At least, it will be once the initial pain wears off.

Marianne Lake

Photographer: Jin Lee/Bloomberg

JPMorgan Chase & Co. expects a fourth-quarter “adjustment” of as much as $2 billion largely driven by the firm’s unremitted overseas earnings facing taxation, Chief Financial Officer Marianne Lake said Tuesday at an investor conference. Bank of America Corp. Chief Executive Officer Brian Moynihan said his firm would also take a hit, having to decrease the value of its deferred tax assets.

“If something gets enacted this year, there would be an adjustment in the fourth quarter; for us, that would be negative and not small,” Lake said. “But as you move forward, depending on when the tax cut comes in, we would benefit from the lower rate.”

The proposed bill was a big topic at the year’s last major banking conference, and executives were more positive on the long-term effects of the bill -- both for them and their clients. Wells Fargo & Co. CEO Tim Sloan said the changes could add another half a percent to gross domestic product, while Moynihan said corporate clients are telling the bank they’ve been waiting for certainty on tax changes so they can decide on long-term capital expenditure plans.

“It will unleash some activity, no question,” Moynihan said of the tax plan. “It’s good for corporate America, and it’s good for us.”

Brian Moynihan

Photographer: Simon Dawson/Bloomberg

Investors have been driving up U.S. bank shares over the last year in anticipation of policy and regulatory changes expected from Donald Trump and his Republican allies. The nation’s two largest banks -- JPMorgan and Bank of America -- have each jumped more than 50 percent since Trump’s election, surpassing both the KBW Bank Index’s 43 percent rise and a 24 percent gain for the S&P 500 Index.

While Moynihan noted that lenders would no longer be able to deduct as much of what they pay in premiums to the Federal Deposit Insurance Corporation, Lake said that the lower corporate tax rate -- whether it ends up at 20 percent or 22 percent -- will outweigh any loss of deductions for her company.

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