American Express sees $2.4 billion earnings hit from tax bill

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American Express Co. said it expects recently passed changes in U.S. tax laws will reduce fourth-quarter earnings by about $2.4 billion, resulting in a net loss for the period.

Full-year earnings for 2017 will be below the earlier forecast of $5.80 to $5.90 per share, the New York-based credit-card issuer said Wednesday in a regulatory filing without offering new guidance. The charge was caused by earnings held overseas facing taxation and adjustments to the company’s deferred tax assets and liabilities.

Lower corporate tax rates approved last year by the Republican-controlled Congress and signed by President Donald Trump will allow for higher earnings in the long run, but accounting rules often require a one-time hit to earnings, which can make for a bruising quarter -- and even year -- for a lender’s results.

The old tax regime allowed companies to defer U.S. taxes until they brought back earnings held abroad. Under the new law, U.S. companies’ overseas income held as cash would be subject to a 15.5 percent rate, while non-cash holdings would face an 8 percent rate. Companies can make the payments in eight annual installments.

Amex said it continued share repurchases in the fourth quarter, and would assess any changes to its buyback program “when we have fully interpreted the impacts from the Tax Act.”

American Express shares gained 0.5 percent to $99.41 at 3:17 p.m. in New York. The stock climbed 34 percent last year, outpacing the 25 percent advance of the Dow Jones Industrial Average.

Bloomberg News
Compliance American Express