Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Nyse  >  General Motors Corporation    GM

SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector newsTweets
The feature you requested does not exist. However, we suggest the following feature:

Citigroup : Why New Tax Law Cost Citigroup, GM $29 Billion

share with twitter share with LinkedIn share with facebook
share via e-mail
0
01/16/2018 | 09:08pm CET
By Michael Rapoport 

Two of America's biggest companies -- Citigroup Inc. and General Motors Co. -- announced a combined $29 billion charge against earnings Tuesday due to the new tax law.

Similar issues will likely ensnare other firms in coming days, even if the numbers aren't as big.

Citigroup took a $19 billion charge to write down so-called deferred tax assets, akin to IOUs that can be used to pay future tax bills, when it announced fourth-quarter earnings Tuesday. That accounted for the lion's share of $22 billion in charges it recorded because of the tax overhaul enacted last month.

GM said at a conference Tuesday that it would take a charge of about $7 billion for the same reason when it reports its fourth-quarter results Feb. 6.

The primary reason for the charges is something that will benefit the companies in the long run: The tax law's reduction in the U.S. corporate tax rate to 21% from the old 35% rate.

Deferred tax assets are past tax credits and deductions that companies can hold on to and use to defray future tax bills. But when the tax rate declines, companies' tax bills shrink.

Many of those credits and deductions become less valuable. This is because it will require a lot more profit to use them up and that will likely occur over a longer period than originally thought.

In that case, companies must write down their deferred tax assets, leading to charges against earnings.

Such assets often result from past losses. Citigroup and GM racked up lots of those in the financial crisis and now have big piles of deferred tax assets. Citigroup had $45.5 billion as of Sept. 30; GM had $30.1 billion.

Still, the companies emphasized that the lower tax rate will ultimately help them. "On balance, tax reform is a clear net positive for Citi and its shareholders," Michael Corbat, Citigroup's chief executive, said during the bank's earnings conference call.

The charges from deferred tax assets have other effects on a company's finances beyond the immediate hit to profit: They cut into a company's book value -- its net worth. That can prove troubling to investors, although the pain can be assuaged by the thought that the lower tax rate will lead to more profit for shareholders in the future.

For banks, there is an added concern: a reduction in book value can also cut into measures of regulatory capital, or the buffers they are required to hold to absorb losses. If that falls too low, regulators could curb a bank's dividend payouts or share buybacks.

Citigroup said Tuesday that its charge on deferred tax assets and other effects from tax reform sliced $6 billion off one important capital measure known as its Tier 1 common equity. Even so, the bank stressed that it still well exceeds regulatory benchmarks and is committed to continuing with plans to return capital to shareholders.

The bank also said that it was taking a $3 billion, one-time charge related to profits held overseas.

Citigroup and GM may be among the biggest examples of the short-term pain brought about by the new tax law, but they won't be the only ones. Other companies reporting fourth-quarter results in coming weeks also are expected to take write-downs.

For instance, Bank of America Corp., which reports earnings Wednesday, has already said it expects a $3 billion charge.

American International Group Inc. said in November that it could see a reduction of about $7 billion in the value of its deferred tax assets from a lowering of the tax rate. The company, which had $20.7 billion in deferred tax assets as of the end of 2016, reports fourth-quarter earnings Feb. 8. An AIG spokeswoman declined to comment further Tuesday.

Conversely, companies that have net deferred tax liabilities, or taxes payable in the future, may record gains. That is because those liabilities will now be worth less as well. Wells Fargo & Co., which was in that position, had a gain of $3.9 billion when it reported earnings last Friday.

Write to Michael Rapoport at [email protected]

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on GENERAL MOTORS CORPORATION
09:08p CITIGROUP : Why New Tax Law Cost Citigroup, GM $29 Billion
06:28p Former Fiat Chrysler exec expected to plead guilty in payments probe - source..
05:59p GM sees flat 2018 earnings, with pickups picking up in 2019
05:56p GM sees flat 2018 earnings, with pickups picking up in 2019
05:56p GM sees flat 2018 earnings, with pickups picking up in 2019
02:52p Maersk and IBM Partner on Blockchain for Global Trade -- Update
02:49p GENERAL MOTORS : sees sustained profits through 2018
02:01p GENERAL MOTORS : GM Forecasts Strong Earnings in 2018
01:53p GENERAL MOTORS CO : Results of Operations and Financial Condition, Financial Sta..
08:48a GENERAL MOTORS : Chevrolet Aims to Make Trucks Handsomer -- WSJ
More news
News from SeekingAlpha
02:59p GM walking tall at Detroit Auto Show
02:18p Fidelity Continues To Dump Tesla Shares
01:11p Greenlight Capital's (David Einhorn) Q4 2017 Letter
12:52p Meet the Detroit Auto Show award winners
08:09a GM higher after guidance update
Financials ($)
Sales 2017 146 B
EBIT 2017 12 295 M
Net income 2017 7 045 M
Finance 2017 5 643 M
Yield 2017 3,55%
P/E ratio 2017 10,93
P/E ratio 2018 7,42
EV / Sales 2017 0,39x
EV / Sales 2018 0,40x
Capitalization 62 597 M
Chart GENERAL MOTORS CORPORATION
Duration : Period :
General Motors Corporation Technical Analysis Chart | GM | US37045V1008 | 4-Traders
Technical analysis trends GENERAL MOTORS CORPORATION
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 23
Average target price 46,8 $
Spread / Average Target 6,3%
EPS Revisions
Managers
NameTitle
Mary Teresa Barra Chairman & Chief Executive Officer
Daniel Ammann President
Randall D. Mott Chief Information Officer & Senior Vice President
Patricia Fiorello Russo Independent Director
Carol M. Stephenson Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
GENERAL MOTORS CORPORATION7.51%62 597
TOYOTA MOTOR CORP5.93%225 320
VOLKSWAGEN8.08%111 129
DAIMLER4.53%97 187
BAYERISCHE MOTOREN WERKE3.41%71 542
HONDA MOTOR CO LTD1.63%65 068