Citigroup reports steep Q4 losses tied to US tax reform

NEW YORK: Citigroup on Tuesday posted strong earnings driven by solid consumer banking results but revealed steep fourth-quarter losses due to a charge from the recent US tax reform.

The global financial group played up efforts to return capital to investors and said the tax overhaul pointed to higher returns ahead for shareholders.

"As we look ahead, we expect the longer-term impact from tax reform to be positive for Citi," Chief Financial Officer John Gerspach told reporters.

"The combination of a lower tax rate, and therefore higher net income... will drive a material improvement in Citi's overall returns."

The company reported net losses for the final quarter of 2017 of $18.3 billion, or $7.15 per share, due to a $22 billion charge stemming from re-measurement of so-called deferred tax assets under the US tax reform enacted in December, and to repatriation of foreign earnings.

Excluding the effects of the tax revamp, net income was actually up four percent over the same quarter in 2016 at $3.7 billion, or $1.28 per share, the company said.

This was in part due to a four percent year-on-year gain in revenues from consumer banking, which rose on improving results in Mexico and Asia.

Many US companies have announced such charges for the fourth quarter due to the recently-passed tax overhaul, though they expect to see a reduced tax burden going forward. Citigroup's share price rose to its highest point in nearly 10 years early Tuesday, gaining one percent to $77.55.

In December, President Donald Trump signed Republican tax legislation that slashed the top corporate rates to 21 percent from 35 percent.

While this reduces companies' tax burdens, it can also have a short-term impact, including by reducing the value of their deferred tax assets, which represent taxes paid in advance and calculated at the older, higher rates and then counted as assets.

Citigroup's net operating income for the full year rose $1 billion over 2016 to $15.8 billion, he added.

For all of 2017, however, the company still reported a net loss of $6.2 billion on revenues of $71.4 billion.

Citigroup plans to return $60 billion in capital to shareholders over three years.

Gerspach also said the bank also suffered a 23 percent decline in equity trading revenue due to an "episodic" $130 million derivatives loss tied to a single client which he declined to identify.

Investment banking revenues rose 10 percent, pushed higher by activities in debt and equity underwriting as well as mergers and acquisitions, he said.