Competing with US banks just got harder
Tax changes are likely to boost their performance far beyond US domestic markets.
If the 2017 results announced by the big US banks since the start of the year are anything to go by, 2018 could be shaping up to be a bumper year – certainly in comparison to the most recent quarters.
Banks often throw in the kitchen sink when times are tough, hoping to bury unpleasantness, like a 20% drop in M&A wallet or plummeting fixed income revenues, under some doubtless necessary but perhaps over-cautious provision, the excess of which can be written back in the future when the dust has settled and when a fillip might really be needed.
This time they didn’t even have to do it themselves.
They were hit by big one-off charges from the US tax reforms announced in December and, sure enough, they didn’t seem too bothered.
It is easy to see why. Those charges are merely the most immediate piece of a reform that will see them all benefit from substantially lower effective tax rates in the future.
And contrary to the supposed intentions of the reforms, even some of those one-off charges have rewarded them.
As JPMorgan helpfully reminded us, deemed repatriation of overseas earnings is just that – deemed.