Big Banks See Trump Tax Reform Benefits, Will Pass Them on to Employees and Stakeholders

$JPM, $WFC, $BAC, $C, $GS

JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) 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  2 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-B charge tied to the tax bill, while Wells Fargo had a $3.35-B benefit.

Bank executives and their Washington representatives were promoters of the Trump corporate tax cut.

Banks are among the highest-taxed industries, largely because they operate here in the US, and have regularly paid effective tax rates of 30% 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 too.

“The modernization of the U. S. tax code is a significant step forward for the company and a big win for the economy,” said JPMorgan Chase’s CFO, 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 Y 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%, the value of those tax-deferred assets had to be written down. The $2.4-B 1-time charge covers the change in value of those assets.

Other banks, like Bank of America (NYSE:BAC). Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS) are expected to take similar actions as they report their results over the next couple of weeks.

JPMorgan said Friday it earned $4.23-B in Q-4, or 1.07/share, down from $6.73 -B, or 1.71/share, in the same frame a year earlier.

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% to $13.03-B.

Wells Fargo said it earned $6.15-B in Q-4, or 1.16/share, Vs $5.27-B, or 0.96/share, in the same frame a year ago

Symbol Last Trade Date Change Open High Low Volume
NYSE: JPM 112.67 12 January 2018 1.83 111.65 112.85 110.84 18,884,100
HeffX-LTN Analysis for JPM: Overall Short Intermediate Long
Bullish (0.39) Very Bullish (0.51) Bullish (0.40) Bullish (0.25)
Symbol Last Trade Date Change Open High Low Volume
NYSE:WFC 62.55 12 January 2018 -0.46 63.2 63.4 62.05 25,884,600
HeffX-LTN Analysis for WFC: Overall Short Intermediate Long
Bullish (0.42) Bullish (0.26) Bullish (0.47) Very Bullish (0.54)

Have a terrific weekend.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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