Barclays to take $1.8b one-off hit from US tax overhaul

LONDON • Barclays will take a charge of about £1 billion (S$1.8 billion) this year as a result of the recent United States corporate tax overhaul driven by President Donald Trump.

However, the British lender expects its future US after-tax earnings to be positively impacted by the changes, it said in a statement yesterday. The one-off charge in the financial year ended Dec 31 will reduce its common equity tier 1 capital ratio by about 0.2 percentage point.

"The ultimate impact is subject to the effect of other complex provisions", which Barclays is currently reviewing, the company said in the statement.

The lowering of the US corporate tax rate from 35 per cent to 21 per cent will benefit most companies, but it also requires them to recalculate deferred tax assets that have accumulated on their balance sheets.

Bank of America Corp will take a US$3 billion (S$4 billion) charge, while Credit Suisse Group is at risk of posting a third consecutive annual loss after predicting it will take a 2.3 billion franc (S$3.1 billion) hit.

Barclays' shares, which are down 9 per cent this year, were little changed after the lender's announcement.

"It looks likely the provisions for base erosion and anti-abuse tax will reduce much of the benefit of the US tax cut," said Mr Edward Firth, a London-based analyst at Keefe, Bruyette & Woods.

"Near term, any positive earnings revisions are likely to be very modest."

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A version of this article appeared in the print edition of The Straits Times on December 28, 2017, with the headline 'Barclays to take $1.8b one-off hit from US tax overhaul'. Print Edition | Subscribe