BofA says tax act forces $3b fourth-quarter earnings cut

New York

Bank of America Corp expects to take a roughly $3 billion hit to fourth-quarter net income after the US tax bill slashed corporate rates.

The reduction is “primarily” from a lower value of net deferred tax assets, according to a filing Friday by the Charlotte, North Carolina-based firm. So-called DTAs pile up in cases where a company loses money and can’t immediately enjoy the tax benefits of those losses.

The legislation signed into law on Friday by President Donald Trump slashes the corporate rate to 21 per cent from 35 per cent, meaning many firms will be forced to write down tax assets accumulated at higher rates. The Republican-drafted law also delivers a package of temporary cuts for businesses and most individuals.

Bank of America “will continue to analyse the Tax Act to determine the full effects of the new law, including the new lower corporate tax rate,” the company said in the filing. The bank is scheduled to report earnings on January 17.

Citigroup Inc. said earlier this month that it may take a noncash charge of $20 billion for the fourth quarter, depending on the final version of the legislation. The bank hasn’t updated that figure.