JPMorgan CEO Jamie Dimon finally got what he wanted: a $2.4 billion tax charge that was about $400 million more than expected. Rival Goldman Sachs may take an even bigger $5 billion hit when it reports earnings next week. These expenses stem from the US tax cuts that were signed into law late last year.
Six months ago, Dimon said he was going be a “broken record” until the government got serious about things like infrastructure investment, corporate tax reform, and improved education. He’s gotten one of his wishes so far: the hit to the bank’s fourth-quarter profit was down to repatriation charges and other arcane accounting adjustments related the tax law signed on Dec. 22.
In its latest quarter, the New York-based bank’s income fell around 40% from a year earlier, to $4.2 billion. Much of the tax-related pain is likely to be one-off, with the corporate tax tweaks likely boosting the bank’s earnings by billions of dollars next year and in the foreseeable future.
Dimon said during a conference call that the US tax system had failed to keep up with other countries that had lowered their corporate tax rate in recent decades. He also suggested that the nation will be far better off “year after year” as a result of the cuts. The sweeping tax changes lowered the corporate rate to 21% from 35%, among other things.
What will the biggest US bank by assets do with the money? CFO Marianne Lake said it could “lean into investment opportunities” like hiring bankers, adding offices, expanding globally, and enhancing its digital payment capabilities. Dividends and stock buybacks could also be revved up.
Dimon pointed out that the tax code still has to “actually be written,” making it hard to predict precisely how the cuts will filter through for the company and the rest of the economy. He said JPMorgan may accelerate some of its investments, and is considering what can be done so that the rest of the country shares the spoils. Finding ways to help communities would help everyone including JPMorgan, he said, by boosting growth overall. “It’s not a giveaway,” he noted.