Trump's Tax Cut Means Billion-Dollar Writedowns for U.S. Banks

... Citigroup Inc. would take the deepest earnings hit -- perhaps $12 billion or more, according to recent estimates by the bank's chief financial officer and several banking analysts. Mark Costiglio, a Citigroup spokesman, declined to comment. Others, including Bank of America Corp. and Wells Fargo & Co. could face multibillion-dollar writedowns.

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At a 25 percent rate, Citigroup would be required to lower its earnings by $6 billion to reflect the reduced value of its tax-deferred assets, John Gerspach, the bank's chief financial officer, told investors at a conference hosted by Bank of America on Nov. 16.

But that could change if a Republican call for exempting overseas corporate earnings from U.S. taxation is enacted as part of the tax overhaul. Under that scenario, Gerspach said, Citigroup would have to write down as much as $12 billion -- because a large part of its deferred tax assets consist of unused foreign tax credits.

Calculations by Brian Kleinhanzl, a financial-sector analyst at KBW, show that at a 25 percent corporate tax rate, Bank of America would face a $6.6 billion writedown, while Wells Fargo's would be $4 billion. Goldman Sachs Group Inc.'s would be $1.6 billion, according to KBW's estimates.

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The implications might also reach mortgage giants Fannie Mae and Freddie Mac, which could see write downs of $10 billion and $5.4 billion respectively, according to a Nov. 27 KBW research note. Those hits would be large enough to potentially require both of them to seek a new infusion of money from the Treasury Department, the note said.