Photo: Frank Gunn, The canadian Press
The chief executive of the Royal Bank, Dave McKay
The leaders of the major canadian banks expect to incur impairment losses in the first quarter, as a result of the tax reform in the United States, but these jerks should be followed in tax savings for their future results.
In the framework of a conference on the banking sector, on Tuesday in Toronto, the chief executive of the Royal Bank, Dave McKay, said he expected to register its results for the first quarter of an impairment charge of US $150 million, plus or minus 10 or 15 %. However, Mr McKay believes that the biggest bank in terms of market value, should enjoy an annual income of 150 to 200 million thanks to the tax savings on the income of companies, granted to the United States by the president, Donald Trump before Christmas.
“This is an item really positive in regards to the impact of the United States tax on the net income,” said Mr. McKay at the conference.
The chief executive officer of the Bank of Montreal, Darryl White, has also confirmed this thesis, during the same conference, recalling that the bank will reduce its future income tax asset of $ 400 million. Mr. White noted, however, that it expected a gain of 100 million at the end of the fiscal year, 10 % of his profits to americans. “It’s an item rather appealing,” said Mr. White at the conference organised by the Royal. “No one had put it in its business plan two years ago. “
Under the tax reform in the United States, the corporate income tax rate increases from 35 % to 21 % from this year. This decision is expected to push up corporate profits, but the tax cut also reduces the value of future income tax assets already recorded in the accounts of the companies. As a result, firms need to make impairments to take account of these changes.
Victor Dodig, chief executive of CIBC, said that his institution will record a non-recurring charge of $ 100 million attributable to changes in us tax. Even if the CIBC also expects a gain in its future performance, it should be “negligible” in the beginning “, given the size of the u.s. operations of the bank, who represent between 12% and 13% of all of its profits, he added. “We expect that [the impact] is progressing, on a relative basis, with the growth of the business,” said Mr. Dodig. “We said that these activities will grow by up to 17 % of all of our activities with the time. “
On Monday, TD Bank said it expect that its financial results for the first quarter were reduced by approximately $ 400 million because of this tax reform, but that the decrease in the corporate income tax rate would have later impact “positive” on its profits.
The chief executive officer of the TD Bank, Bharat Masrani, said Tuesday that he had not evaluated the precise impact of the tax reform, since the latter is quite complicated and involves some ambiguities. He added that additional information should be collected from the revenue agency the u.s. Internal Revenue Service, or IRS) and the u.s. department of Commerce. The TD is expected to be able to provide more details in this regard when its first quarter will end on 31 January.