Morgan Stanley, Deutsche Bank Detail Tax-Law Charges
January 05 2018 - 03:41PM
Dow Jones News
By Michael Rapoport
Two more big banks said Friday they expect to take significant
charges against their fourth-quarter earnings because of the impact
of the new U.S. tax-overhaul law.
Morgan Stanley said it expects to take a fourth-quarter charge
of $1.25 billion. Deutsche Bank AG said it anticipates a charge of
about EUR1.5 billion ($1.81 billion).
Morgan Stanley said provisions of the new tax law will cost it
$1.4 billion, primarily from a reduction in the value of its
deferred-tax assets. The bank said this charge will be offset in
part by a $160 million benefit from remeasuring reserves and
interest related to Internal Revenue Service examinations of its
tax returns.
Deutsche Bank said its charge also relates to deferred-tax
assets and is expected to lead the German bank to record a small
full-year loss for 2017.
Deferred-tax assets are past credits and deductions that
companies can hold on to and use to defray future tax bills. Some
banks have large quantities of them, generated by the losses they
suffered during the financial crisis. But the new law's reduction
in the U.S. corporate tax rate, to 21% from 35%, means many of
those credits and deductions will become less valuable and must be
written down.
The announcements by Morgan Stanley and Deutsche Bank follow a
series of similar recent disclosures from other banks, including
Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc.,
that expect fourth-quarter charges because of the new tax law. In
addition to reductions in the value of deferred-tax assets, some
banks also must pay a one-time tax imposed by the new law on U.S.
companies' overseas earnings.
The reduction in the corporate tax rate means the new law is
expected to benefit many banks in the long term, though neither
Morgan Stanley nor Deutsche Bank made any mention of that issue
Friday.
Morgan Stanley will report its fourth-quarter earnings on Jan.
18. Deutsche Bank is due to report on Feb. 2.
--Allison Prang and Nathan Allen contributed to this
article.
(END) Dow Jones Newswires
January 05, 2018 15:26 ET (20:26 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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