Citigroup Inc. (NYSE:C) is likely to take a hit of about US$20bn to profits under the US tax reform plans recently passed by Congress, the banking giant’s finance chief John Gerspach said on Wednesday.
Gerspach said the charge will result from the bank writing down the value of deferred tax assets as well as the impact of changes to rules regarding the repatriation of profits earned in other countries to the US.
His comments, reportedly made at a financial-services conference in New York, expand the lender’s previous guidance that tax-code changes could result in a hit of about US$15bn if the rate was cut to 25%.
Gerspach said that neither the charge, nor a resulting US$4bn decline in the bank’s regulatory capital, would affect Citigroup’s plan to return US$60bn to investors through to 2020.
Over the long term, though, any immediate hit to profits at Citigroup and other banks from the deferred tax assets are likely to be offset by higher net income due to a lower tax rate.
In pre-market US trading, Citigroup shares were 0.2% lower at US$75.30.