Tags: UK | Tax | US | Banks | Billions

Report: UK Banker Bonus Tax Will End Up Costing US Banks Billions

Thursday, 17 Jun 2010 01:21 PM

U.S. banks reportedly will have to pay about $2 billion on their second-quarter earnings to cover the U.K. tax on bankers’ bonuses, charges which could significantly reduce profits.

Analysts say the tax will be a negative factor when U.S. banks report results for the April-June period next month, reducing earnings per share at Citi, JPMorgan and BofA by 10 percent or more, the Financial Times reports

The tax, passed last year in response to public outrage at bankers’ pay, will force banks to pay a one-time 50 percent levy on bonuses above 25,000 British pounds ($37,000), including those awarded as shares.

Goldman Sachs will be charged more than $600 million.

Citi has said it will take a $400 million hit for the U.K. levy, which could reduce its quarterly EPS by about 13 percent.

Bank of America says the tax will cost it about $465 million.

Morgan Stanley has not forecast its total costs, but analysts predicted the tax would shave $350 million, or 21 cents a share, from the bank’s earnings.

Analysts are already lowering their earnings estimates for banks.

“The bulk of the decline is from the UK bonus tax, which the company has not yet disclosed but we estimate at $525 million,” John McDonald of Bernstein Research wrote in a note to clients explaining why his estimate of JPMorgan’s second quarter earnings had dropped from 80 cents to 66 cents.

Fierce Finance reports that analysts at Citigroup have composed a list of the U.S. banks that are "most exposed" to the ongoing financial reform effort.

If Congress passes the Volcker Rule and some form of the Blanche Lincoln rule that would require spinning off derivative trading from other bank activities, the most exposed appear to be Goldman Sachs, followed by Morgan Stanley, JPMorgan and Bank of America.

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U.S. banks reportedly will have to pay about $2 billion on their second-quarter earnings to cover the U.K. tax on bankers bonuses, charges which could significantly reduce profits. Analysts say the tax will be a negative factor when U.S. banks report results for the...
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2010-21-17
Thursday, 17 Jun 2010 01:21 PM
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