The US Tax Cuts and Jobs Act, implemented in December, could not have come at a better time for banks wanting to sink the results of their poorly performing markets businesses into a swamp of one-off tax charges.
Its timing enabled them to load up what was already a poor fourth quarter with big hits to their after-tax profits, rather than have those spill into what may well be a much more positive first quarter of 2018. That paves the way for a happier year ahead.
Substantially lower effective tax rates after the reforms offer a windfall for the banks in the future. And the fact that those exposed to losses relating to the Steinhoff accounting scandal were also able to funnel those into the fourth-quarter 2017 mix will have only added to the relief.
Fixed income, currencies and commodities (FICC) sales and trading businesses looked grim across the board, although some fared better than others. The fourth quarter of 2017 looked especially bad in comparison with the same period the year before, which had seen a flurry of activity in the wake of the US presidential election. But even on a full-year basis, low volatility and low client activity hurt all the big players.
