Saturday, January 13, 2018 1:00 am
Top banks expect big benefits from tax deal
KEN SWEET | Associated Press
At a glance
• JPMorgan said Friday it earned $4.23 billion in the fourth quarter, or $1.07 a share, down from $6.73 billion, or $1.71 a share, in the same period a year earlier. Excluding the $2.4 billion charge, the bank would have earned $6.7 billion, or $1.76 a share, which beat analysts' forecasts of $1.69 a share.
• Wells Fargo said it earned $6.15 billion in the fourth quarter, or $1.16 per share, versus $5.27 billion, or 96 cents per share, in the same period a year ago. Analysts polled by FactSet had expected Wells Fargo to report a profit of $1.23 a share.
NEW YORK – Two of the nation's biggest banks – JPMorgan Chase and Wells Fargo – 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 two 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 billion charge tied to the tax bill, while Wells Fargo had a $3.35 billion benefit.
Bank executives and their lobbyists in Washington were big promoters of a corporate tax cut. Banks are among the highest-taxed industries, largely because they operate here in the U.S., and have regularly paid effective tax rates of 30 percent 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 as well.
“The modernization of the U.S. tax code is a significant step forward for the company and a big win for the economy,” said Marianne Lake, JPMorgan Chase's chief financial officer, 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.