Citi's Earnings Seen Hurt by New Tax Law -- Earnings Preview

01/13/18 08:14 AM EST
By Christina Rexrode 

This quarter, Citigroup Inc.'s fourth-quarter results will likely be overwhelmed by a giant one-time tax charge. Here's what to look for in Tuesday morning's release.

Earnings: Don't Expect Any

Citigroup said last month it expected to take a $20 billion charge to earnings in the fourth quarter because of the tax overhaul. That is such a big hit that analysts expect it to lose money both for the quarter and the full year of 2017.

Revenue: Steady as It Goes

Analysts polled by Thomson Reuters are expecting revenue of $17.22 billion, which would be up from about $17 billion a year ago.

The Tax Law Has Cometh

Citigroup isn't the only bank to have to take a hit for the quarter because of the tax law. JPMorgan Chase & Co. on Friday reported $2.4 billion in costs from the tax overhaul. But long term, the new law should be a windfall for banks, because it slashes the corporate tax rate to 21% from 35%. Investors will be interested in any guidance about what that means for Citi.

Trading With Less Tumult

Political surprises in late 2016 -- most notably, the election of Donald Trump -- stirred up volatility and made for trading booms. But now, in the relative calm, banks including Citigroup expect trading revenue to be down. JPMorgan's trading revenue fell 26%, though the bank said it would have been down 17% excluding the impact of the tax law and another one-time loss.

The Credit Card Bill Is Coming Due

Under CEO Michael Corbat, Citigroup has been spending heavily to spiff up its credit-card unit, including new rewards programs and marketing. Investors will want to know when that will start paying off.

Write to Christina Rexrode at christina.rexrode@wsj.com

 

(END) Dow Jones Newswires

January 13, 2018 08:14 ET (13:14 GMT)

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