THESIS 2017 - ILLUSION OF GROWTH
THESIS 2017: BANKS GOT A $21B TAX WINDFALL.. THEN FIRED THOUSANDS & REWARDED THEMSELVES
THESIS 2017: ILLUSION OF GROWTH
SOURCE: 02-06-19 - "Banks Got A $21 Billion Tax Windfall... Then Fired Thousands And Rewarded Themselves"
Companies "don’t go and distribute cash to their shareholders in the form of buybacks or dividends if they have good investments to make of a long-term capital nature."
- On average, the banks saw their effective tax rates fall below 19 percent from the roughly 28 percent they paid in 2016.
- While the breaks set off a gusher of payouts to shareholders, firms cut thousands of jobs and saw their lending growth slow. -Bloomberg
- The 23 firms boosted dividends and stock buybacks 23% and slashed thousands of jobs with a few signaling that more layoffs are in store.
- Wells Fargo and Bank of America slashed nearly 4,900 and 4,000 jobs last year - only to be outdone by Citigroup's 5,000 job cuts.
- While the banks did not provide regional breakdowns, press reports reveal that at least some of the cuts were international.
- More cuts are on the horizon as well.
- State Street Corp announced in January that it will be laying off 1,500 people thanks to automation,
- Citigroup may cut thousands of staff from their technology and operations areas in the coming years.
- As customers are being shifted to mobile platforms and new technologies to handle banking needs, the many banks have announced increased investments in automation.
- "The ratio of personnel costs to revenue declined as banks gave workers a smaller slice of the money they brought in."
- Customers also, did not benefit significantly from Banks' tax windfall - as loan portfolios only increased by 2.3% in 2018 vs. 3.6% a year earlier.
The KBW Bank Index of the nation’s largest lenders tumbled 20 percent last year.
The surge in payouts underscored that banks have limited opportunities to keep expanding their businesses profitably. So, they’re pumping out cash.
The bank index has rebounded 13 percent this year, helped by the payouts and record results.
Last year major US banks were able to cut their collective tax bill by around $21 billion thanks to the GOP tax overhaul - nearly double the budget for the entire IRS, then fired thousands of employees and tightened lending standards, reports Bloomberg.
By year-end, most of the nation’s largest lenders met or exceeded their initial predictions for tax savings. On average, the banks saw their effective tax rates fall below 19 percent from the roughly 28 percent they paid in 2016. And while the breaks set off a gusher of payouts to shareholders, firms cut thousands of jobs and saw their lending growth slow. -Bloomberg