NEW YORK — Jan 12, 2018, 4:14 PM ET

Bank execs sing praises of new tax law as windfall looms

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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.

Like many banks after the 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 percent, the value of those tax-deferred assets had to be written down. The $2.4 billion one-time charge covers the change in value of those assets. Other banks, like Bank of America, Citigroup and Goldman Sachs are expected to take similar actions as they report their results over the next couple of weeks.

JPMorgan now expects its effective corporate tax rate to be roughly 20 percent. In comparison, JPMorgan paid an effective tax rate of 28.4 percent in 2016 and a tax rate of 31.9 percent in 2017. The change will save JPMorgan billions of dollars over the coming years. The bank paid $9.8 billion in income taxes in 2016.

Wells Fargo is unique in that it had deferred tax liabilities, not assets, on its balance sheet, basically income taxes it may owe in the future. Wells Fargo some of its $7 billion of deferred tax liabilities and recorded a $3.35 billion gain. Wells Fargo now expects its effective annual tax rate to be around 19 percent.

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.

Outside of the tax bill, 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 percent to $13.03 billion."

But other parts of JPMorgan's businesses, most notably its trading desks, did not fare as well in the quarter. JPMorgan's trading division reported revenue of $4.4 billion in the quarter, down 22 percent from a year earlier.

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.

Wells continues to try to shake off the fallout from its 2016 sales practices scandal, and a subsequent scandal in mid-2017 where the bank sold car insurance policies to customers who didn't need it.

While profits in the consumer banking division rose to $3.67 billion compared to $2.73 billion in the same period a year ago, much of that growth was tied to the tax gain that Wells Fargo recorded this quarter. Consumer loans fell to $956.8 billion from $967.6 billion a year earlier, notable in a period when higher economic growth and higher consumer confidence should have translated into more loans issued to consumers. The bank's net interest margin also did not improve in the quarter, despite the Federal Reserve raising interest rates four times in the last year.

Shares of JPMorgan rose 1.7 percent to $112.67. Shares of Wells Fargo fell less than 1 percent to $62.55.

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  • Dave

    When JPMorgan Chase and Wells Fargo are happy, we all should be scared.

  • JuPMod

    In other words, banks are free to go back to swindling the people out of their hard-earned money, making their CEOs richer, etc. Pure greed.

  • jims444

    This Republican tax bill is straight out of the playbook of 1929 all over again and for you who lived through the great depression, you should be very, very afraid. The crash followed a decade of Republican control of the federal government during which trickle-down policies, including massive tax cuts for the rich, produced the greatest concentration of wealth in the bank accounts of the richest 0.01 percent at any time between WW1 and 2007. When trickle-down economics, tax cuts for the very rich, and deregulation of virtually everything resulted in another economic collapse. We’ve seen this “dog and pony show” before and it has always resulted in economic catastrophe and no doubt will once again. Remember this when you vote in 2018 and again in 2020 or we will all live to regret it. The truth is that corporations have enjoyed record profits for their stockholders and themselves despite the so called disparity in corporate taxes but have refused to pass any of this wealth down to their employees or create jobs. This trickle-down plan has never worked and never will and always leaves poverty and economic disaster behind it and this is a Republican tax scam of the highest order. All this while this so called “fiscally responsible conservative party” reportedly adds 1.5 trillion dollars to our national debt. This temporary infusion of borrowed cash into the economy will result in artificially generated growth and a flurry on Wall Street but when it runs out, the economy will crash as it always has under this often disproved philosophy. Even Ronald Reagan’s OMB Director, David Stockman said after leaving office: “Trickle down economics is what I call “Voodoo Economics.” The harm it will do to our national debt and economy will be disastrous, not to mention what it will do to people’s health care, Social Security, Medicare and other programs that America’s middle class and poor families count on to survive. Now that the Republicans have gotten their tax breaks for their rich friends and corporate supporters, their next move will be to claim that we cannot afford what they call the “Entitlements” such as Social Security, Medicare and Medicaid and they will be cutting these programs and seeking to eliminate them. When that is done, their attack on America’s poor and middle class will be complete. If you are a Senior Citizen, someone who has health problems or have children with health problems, someone who is retired and depends on Social Security and/or Medicare, you should not only be very afraid, you should be ALARMED. If not, and you fail to support a change in the House and Senate in 2018 and 2020, you are going to be very, very sorry.

  • NavinJay

    In other words, you lined the pockets of the GOP to make sure they passed the bill. Gotcha.

  • IndependentforFreedom

    And the wage gap grows wider and wider. Since the Republicons and their empty vessel of a host, Trump is so kind handing banks obscene tax cuts; maybe, now maybe, dummy Donnie doesn't have to get his fraudulent money laundering funds from Russia or Deutsch sanctioned banks any longer - American banks can now do business with the Drumpf as their appreciation for scapegoating the Middle Class once again,

  • Cîroc Obama

    Still waiting for the trickle down effect

  • skyviewperspective

    That's right folks. The group that is giving you .03% on your savings accounts are realizing multi-billion dollar savings. Don't worry, Congress said, when they passed the law, that the corporations would do the right thing. So start watching your mailboxes. It looks like Wells Fargo and Jp are going to be sending you your portion of the 9 billion.

  • RedSoxPatriotsCelticsBruinsFan

    165 million people in this country receive government benefits, over half the country. The gap between the rich and the poor gets wider and wider.

  • j penske

    "JPMorgan executives say they expect to pass along some of the benefits,
    currently in unnamed ways, to consumers, its employees and its
    shareholders".
    The key word here is "some". Of course MOST of the benefits will probably go to the executives.

  • Puddin' Twain

    What’s not for billionaires to like in the Republican tax scam?

  • Blankety Blank

    Oh boy we are all gonna be rich can't wait for those trickle down bucks to come rolling in! Bwhahahahahahahahaha! What a grand scam! Now genius how are you gonna pay down the huge debt problem you've created? And why has Moody's and the IMF been so quiet during this whole grand slam scam? Not a word about lowering the US credit rating! Gee do you think they are racists too?

    They won't stick us with a lower rating until Bernie Sanders is in the Oval Office.

  • THEFred

    Of course THEY love it. It's one of the biggest thefts for the benefit of the obscenely rich in history. Of the rich, by the rich and for the rich. They say they're going to pass the savings on to consumers in "unnamed ways." Will they get rid of some of their ridiculous fees or improve their stingy rates? Ahaha, don't hold your breath! Just have blind faith that something will eventually trickle down to you indirectly somehow. This is political corruption at its swampiest!

  • P bis

    Wall Street will become incredibility rich in the next 3 yrs. The unfairness of it all is mind numbing. Trump in his sorry jealous obsession to undo every Obama rule and law, has lifted all restrictions on Wall Street. If Wall Steet runs thru with your money, you have no recourse. If your bank says "Sorry, we dont have your money, "youre out of luck. You are squirrel poop with your money right now, because you cant afford the lawyers the banks can. Sorry for all of us.

  • kritikosman

    Who's surprised? Shysters and thieves roll like that!

  • CantStoptheSignalMal

    Well at least these new tax cuts are helping those who paid off the Republican politicians for it... <rolls-eyes>

  • Ray

    Just what this country needs,....more money for bank executives!

  • Tyler U

    Lol! Wells Fargo saw increased business last year... until it was found that the increase was the result of Wells Fargo opening bank accounts without getting consent from the people they opened them for.

    When you commit fraud, you always see an increase in business... until you’re caught. In this case, Wells Fargo came out with a net gain, because they weren’t fined what they should have been. When corporations like this make a profit from these schemes, they continue to scheme. It wouldn’t shock me to see Wells Fargo getting nailed for this again next year.

    In short: nobody’s doing business with Wells Fargo.

  • mountainlady

    These bankers are vultures. They set off the 2008 economic disaster with their greed and ended up being bailed out by the government. Now they can reap billions of dollars while the US accrues a 1.5 trillion dollar deficit and how does this benefit America? IT DOESN'T. Banks manufacture NOTHING. Now, thanks to the new tax law, they can make billions more and STILL DO NOTHING for the country.

  • kritikosman

    Well, there's a shocker for ya! Thieves!!!

  • fifolo

    Yea, these are you peeps, Murica. Right? Just what you voted for, right?

  • fmd160

    It's bad enough that they are going to be rolling in the dough, but do they have to brag about it in front of those who are going to be paying for that dough?

  • Ctrygrl

    Well isn't that wonderful, and with the Consumer Protection Board on its way to oblivion they can once again start charging all those fees on credit card debt and opening all those bogus accounts without any fear of getting caught. The boys are going to have a great Christmas this year

  • Guillory

    My portfolio and I have been singing praises to the Trump administration ever since he was elected.

  • kritikosman

    And their wallets too.

  • LewTwo

    Aren't these the same folks that were 'too big to let fail' and had to be 'bailed out'.

  • TexasVulcan

    Gee, bank executives say they now have ANOTHER license to steal. Great.