Barclays expects $1.3 billion writedown from U.S. tax
reform
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[December 27, 2017]
By Ben Martin
LONDON (Reuters) - Barclays expects to take
a writedown of about 1 billion pounds ($1.34 billion) on its annual
post-tax profit as a result of the U.S. tax overhaul, the bank said in a
statement on Wednesday.
The reform to the tax system signed into law by President Donald Trump
on Dec. 22 will force the British lender to reduce the value of its
deferred tax assets, prompting it to take a one-off charge in its
results for the 12 months to the end of December.
It will also lead to the bank's common equity Tier 1 capital ratio, a
key measure of its financial strength, falling by about 20 basis points,
the lender said.
Since taking the helm at Barclays in December 2015, Chief Executive Jes
Staley has streamlined the bank into a transatlantic lender focused on
the United States and Britain.
The restructuring has led it to exit a raft of non-core operations, such
as its business in Africa and units in Asia, in a bid to simplify its
structure and boost returns to shareholders.
Barclays already slumped to a 628 million pound attributable loss in the
nine months to the end of September following write-offs in the wake of
its exit from Africa. The 1 billion pound charge to account for the U.S.
tax changes is expected to push it further into the red.
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The logo of Barclays bank is seen on glass lamps outside of a branch
of the bank in the City of London financial district in London
September 4, 2017. REUTERS/Toby Melville /File Photo
The $1.5 trillion tax overhaul is the biggest reform of the U.S. tax system
since the 1980s and will see that corporate tax rate slashed to 21 percent from
35 percent.
While Barclays said the reduction in the tax rate is expected to "positively
impact" its future post-tax earnings in the United States, it also cautioned
that the Base Erosion Anti-Abuse Tax (BEAT), which was included in the
legislation and designed to prevent multinational firms from abusing the tax
code, could significantly offset that benefit.
"Due to the uncertain practical and technical application of many of these
provisions, it is currently not possible to reliably estimate whether BEAT will
apply and if so, how it would impact Barclays," the lender added.
(Reporting by Ben Martin, editing by David Evans)
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