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Citigroup Super Psyched About Worst Quarter Ever

Mike Corbat & co. could not be more excited about this $22 billion write-down.
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In a simpler time, Citigroup would be reporting a rather underwhelming-sounding $3.7 billion fourth-quarter profit. But Donald Trump is president and a massive tax overhaul that reads as though it were written by the Chamber of Commerce has just gone into effect. Still, this being 2018 and that tax overhaul being Donald Trump’s tax overhaul, there are paradoxes that must first be reconciled before the full, beautiful, amazing glory of the whole thing can be truly appreciated. In Citigroup’s case, that involves a $22 billion charge producing an $18.3 billion quarterly loss, the largest in the bank’s history. Not that you get any sense of the magnitude of the thing hearing Citi’s CFO talk about it.

Citi.Trump

“I think there’s a great opportunity for the economy to grow,” Mr. Gerspach said.

He brushed off the tax charge as a temporary bump in the road. “It’s something we think we can quickly overcome,” he said, “and it’s not a headwind that causes us to alter any of our existing plans.”

Fittingly, this gigantic write-down and consequent mammoth loss stems from some of Citi’s previous worst quarters, specifically those during the financial crisis, which generated $58 billion in deferred tax assets that Citi has been slowly whittling down, using them to whittle down the income on which it currently has to pay taxes. But tax reform slashed those deferred-tax assets from $45.5 billion to just $23 billion on Jan. 1, so Citi just spent them all on Dec. 31.

No matter: In spite of the huge loss, and the big drop in trading revenue the charge helps hide, Citi still expects to have $60 billion to return to shareholders in the coming years, which will be anni mirabili thanks to President Trump.

“Tax reform does not change our capital return goals,” Chief Executive Officer Michael Corbat said in the statement. The reform “not only leads to higher net income and increased returns, but also serves to strengthen our capital generation capabilities going forward.”

Citigroup Earnings Wiped Out by Tax Charge [WSJ]
Citigroup Plays Up Investor Payouts Once Tax Cuts Trigger Profits [Bloomberg]

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