Bank of America executives said Wednesday the bulk of the company’s savings from the new federal tax overhaul will be passed on to shareholders.
CEO Brian Moynihan, on a conference call for the bank’s fourth-quarter earnings, said he expects the biggest portion of savings from a lower corporate tax rate will go to shareholders via dividends and share buybacks over time.
“Yes, we will expect to return more capital to shareholders given the tax act,” Moynihan said, referring to legislation passed last month that lowers the rate corporations pay on profits from 35 percent to 21 percent.
Bank of America already announced payouts for some of its employees since the legislation’s passage. Last month, the bank said it was giving $1,000 one-time bonuses for roughly 145,000 U.S.-based employees, about 70 percent of its workers ––joining other companies making similar moves in the bill’s wake.
On Wednesday, Bank of America’s chief financial officer said the Charlotte-based company’s 2018 tax rate before the tax legislation would have been around 29 percent. Following the tax bill, the bank now expects it to be about 20 percent, he said.
Bank of America clients are optimistic about the tax legislation, Moynihan said, adding that in the long term, the bank should benefit from greater loan growth to companies that have more cash because of lower tax rates.
“We have no doubt ... that businesses, including our company, will have to look to take advantage of some of the tax savings to invest to improve their business and competitiveness faster than they would have done before the tax reform act,” Moynihan said.