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Citi plunges to giant $18bn loss on back of Trump tax reforms

Jon Yeomans
Net losses for the final quarter of 2017 were $18.3bn at Citi - © 2016 Bloomberg Finance LP

President Donald Trump's tax reforms have pushed US banking giant Citigroup to a vast $18.3bn (£13.3bn) loss in the fourth quarter of last year.

As a result Citi will record its first annual loss since 2009, of $6.2bn.

Citi blamed the loss on a $22bn one-off hit incurred by the US Tax Cuts and Jobs Act, passed into law by President Trump just before Christmas. This was slightly higher than the $20bn flagged by chief financial officer John Gerspach last month.

Roughly $19bn of this charge arose from Citi reassessing its deferred tax assets, which had allowed it to delay paying tax on the basis of past losses, many of them accrued during the financial crisis.

A further $3bn relates to earnings made abroad, which will now be liable for some corporate tax in the US.

Without this one-off charge, Citi said it would have made $3.7bn in net income for the last three months of 2017.

The tax reform - a flagship policy of the Trump administration - is expected to lower the corporate tax rate for most companies in the long term. Indeed Citi chief executive Michael Corbat said it would to lead "higher net income and increased returns". 

However in the short term a raft of large multinationals have been forced to report a short-term hit to their profits, although none as large as the impact on Citi. Last month Barclays said it would take a £1bn charge to profit after tax for the year, while Shell put the damage at up to £1.8bn. Fellow Wall Street bank JP Morgan Chase said earlier this month it would take a $2.4bn hit from the reform.

In an attempt to reassure investors, Mr Corbat reaffirmed that Citi would look to pay $60bn back to shareholders over the next three years. 

Citi's revenues rose 1pc to $17.3bn in the fourth quarter. Across the year they rose 2pc to $71.4bn.

The bank's shares rose just under 1pc in New York to $77.42, its highest level in nearly 10 years.