Citi stock tumbled, closing at session lows after the bank's CFO John Gerspach confirmed that the trading woes plaguing other banks would impact it as well, previewing Q4 trading as down "in the high teens." The percentage decline in trading revenue from a year earlier is largely driven by the bank’s fixed-income unit, Gerspach said on Wednesday at an investor conference in New York.

He added that G10 rates- and G10 currencies-trading have been challenged in quarter, although the woes were offset by Citi’s co-brand credit-card deal with Costco Wholesale Corp. which has been a bigger success than expected.

However the bigger surprise was the Gerspach's disclosure that he expects the bank to take a noncash earnings charge of about $20 billion, or 10% of shareholder equity, if the Senate’s version of the tax reform bill is enacted.  He explaine that the hit to profit would result in part from writing down deferred tax assets in the period the bill is signed.The number is far greater than what the company had provisioned, and analysts had expected previously expected a writedown of around $12 billion.

Which is odd since the entire tax law was written with banks pardon corporations in mind.

Confused why the deferred tax asset could suddenly vaporize? Doug Kass has written a useful primer on the topic:

As the largest "owner" of deferred tax assets generated during the past financial crisis, Citigroup is the most vulnerable bank to the likely introduction of lower corporate tax rates.

Deferred tax assets accumulate when losses pile up and those "benefits" can't be utilized. A reduction in the effective corporate tax rate and the lower value of unused foreign tax credits likely will result in a one-time hit at Citigroup of about $12 billion to $13 billion in the form of a write-off of deferred tax assets held.

Keefe Bruyette estimates that writedowns also would be seen at Bank of America(BAC) ($6.6 billion), Wells Fargo (WFC)($4 billion) and Goldman Sachs (GS)($1.6 billion). That is because the bank's deferred tax asset account will have to be written down - it is not as valuable as in the previous (higher) tax regime.

As Cass concludes, "I have long expressed the view that investors looking at Citi's share price relative to book value was misplaced in its calculation. When I have mentioned this possible hit to Citigroup's book value in my appearances in the business media, I usually got a dazed stare! This issue has been ignored by many -- but it will be no longer."

he was right, and now that the CFO has confirmed Kass' concerns, the stock closed at session lows, dragging other money-center banks down with it.