US banks will foot a totl bill of about $2bn in their second-quarter results to pay for the UK tax on bankers’ bonuses. This charge could significantly cut down the earnings at financial groups such as Citigroup, JPMorgan Chase and Bank of America.
With Goldman Sachs alone in line for a $600m-plus charge, the amounts to be paid by US banks will contribute to a windfall of £2.5 billion from the levy. It is much larger than the British authorities have expected. According to the analysts, it is said that the tax will be a negative factor when US banks report results for the April-June period next month, reducing the earnings per share at Citi, JPMorgan and BofA by 10% or more.
Unlinke some European rivals, which passed on some of the tax to employees in the form of lower pay to avoid diping into shareholders’ funds, most US banks paid the full amount, shielding bankers from the effects of the levy.
The charges for the UK bonus tax are likely to compound a challenging quarter for US banks. Analysts predict an end to their streak of investment banking and trading profits. With the sovereign debt troubles of Europe and bearish news on US economic growth unsettling capital markets, investors and companies have largely stayed on the sidelines in the past quarter, cutting down the deal-making activity of large banks.