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Financial & Economy | G-Fin™ | Grants

Bank of America 4Q profits fall by 48 percent due to tax law

The Free Press WV

Bank of America said Wednesday that its fourth-quarter profits fell by nearly half from a year ago, as the bank had to book $2.9 billion in charges related to the new tax law.

The consumer banking giant said it earned $2.37 billion, or 20 cents a share, down from $4.54 billion, or 39 cents a share, from the same period a year ago.

Like many banks this quarter, Bank of America had to write down the value its stockpile of deferred tax assets on its balance sheet. The assets are basically credits it could have used to pay future income taxes that built up after the 2008 financial crisis, when banks like BofA had billions of dollars in losses from bad mortgages and other toxic investments. Because the maximum corporate tax rate was reduced from 35 percent to 21 percent under the Republican tax law, Bank of America and other financial companies had to revalue those credits.

The bank also had to write down $946 million in renewable energy investments that were also impacted by the tax law.

Outside of the impact of the tax law, Bank of America’s quarterly results benefited from rising interest rates. The Federal Reserve has raised interest rates four times in the last year, and that allows banks like BofA to charge more to borrowers for loans. Net interest income at Bank of America rose 11 percent from a year earlier to $11.46 billion.

Trading revenues fell 11 percent to $2.5 billion in the quarter. Many banks have reported declines in trading revenue for the fourth quarter as markets were abnormally calm last year, which kept investors from actively trading.

Total revenue at the bank was $20.44 billion, up from $19.99 billion in the same period a year earlier.

U.S.home construction tumbled 8.2 percent in December

The Free Press WV

Groundbreakings on new homes fell 8.2 percent in December, with builders ending 2017 by slowing down their construction of single-family houses.

The Commerce Department said Thursday that the monthly decline put U.S. housing starts at a seasonally adjusted annual rate of 1.19 million units. Almost all of the decrease came from builders beginning work on fewer single-family houses, a reversal from the robust gains reported in October and November.

Despite the monthly decline, housing starts in 2017 were their strongest in a decade. But the ramp up in construction has done little to offset the dwindling pool of homes for sale, which has caused prices to surge faster than wage growth.

The hot housing market is being fueled by a strengthening job market. The unemployment rate is holding steady at a 17 year-low of 4.1 percent. Workers are feeling more confident as the Labor Department said separately on Thursday that the number of unemployed workers filing for jobless benefits, a proxy for layoffs, plunged by 41,000 last week to 220,000. That is the lowest level for benefit applications in nearly 45 years.

Yet homebuilders face pressures from high land prices and a construction workforce that relies heavily on immigration at a time when President Donald Trump is seeking to limit the inflow of foreigners into the United States.

“The pace of housing starts averaged just 1.2 million for the year, far short of the historical average of 1.5 million starts,” said Nela Richardson, chief economist at the real estate company Redfin. “Given the three-year drought in inventory and surging homebuyer demand, a pace of 2 to 3 million starts would be reasonable and appropriate.”

For all of 2017, housing starts have risen a mere 2.4 percent. Single-family house construction drove the entire annual increase, while the building of apartment complexes plunged last year as more renters appear to be seeking properties to buy. The slight gains in construction have been unable to fully offset the drastic fall over the past year in the number of existing homes put up for sale.

Housing starts in December fell in the Northeast, Midwest, South and West.

Building permits, an indicator of future construction, slipped 0.1 percent in December to 1.3 million.

After ‘monkey hoodie’ scandal, H&M hires diversity leader

The Free Press WV

Swedish low-cost fashion brand H&M says it has appointed a diversity leader after having been accused of racism over an ad showing a black child dressed in a hoodie reading “coolest monkey in the jungle.”

H&M said late Tuesday on its Facebook page that the group’s “commitment to addressing diversity and inclusiveness is genuine, therefore we have appointed a global leader, in this area, to drive our work forward.”

The Stockholm-based company reiterated that “the recent incident was entirely unintentional” but “demonstrates so clearly how big our responsibility is as a global brand.”

NBA star LeBron James and rapper Diddy were among those who had responded with outrage to the ad. American rappers The Weeknd and G-Eazy cancelled partnerships with H&M. In South Africa, there were protests at some H&M stores, while the response has been more muted in Europe.

The case highlights how important it has become for multinationals to take into account differences in cultural views and sensitivities between the markets it sells in. That’s especially true as social media makes it possible for an ad posted in one country to be shared and viewed anywhere else in the world.

Usual Weekly Earnings of Wage and Salary Workers

The Free Press WV

Median weekly earnings of the nation’s 114.2 million full-time wage and salary workers were $857 in the fourth quarter of 2017 (not seasonally adjusted).

This was 0.9 percent higher than a year earlier, compared with a gain of 2.1 percent in the CPI-U.

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