Corporate tax reform has been a key policy initiative of Trump's as he has called for slashing the corporate tax rate from 35% down to 15%. While this is welcome news for most companies, it would result in some fairly staggering write-downs for Wall Street's largest banks that amassed substantial net operating losses in 2008 and 2009.

According to Bloomberg, Citibank would be hardest hit with write-downs that could hit earnings for up to $12 billion or more. 

Donald Trump’s planned U.S. corporate tax cuts could translate to a big one-time earnings hit for many of the biggest U.S. banks, thanks to tax benefits they generated during the 2008 financial crisis.

Citigroup Inc. would take the deepest earnings hit -- perhaps $12 billion or more, according to recent estimates by the bank’s chief financial officer and several banking analysts. Mark Costiglio, a Citigroup spokesman, declined to comment. Others, including Bank of America Corp. and Wells Fargo & Co. could face multibillion-dollar write-downs.

The banks might have to write down deferred tax assets, which often pile up when a company loses money and can’t immediately enjoy the tax benefits of those losses. Any write-downs won’t have much impact on capital levels for the banks for regulatory purposes, and lower taxes will allow for higher earnings in the long run.But a one-time hit to earnings can make for a bruising quarter -- and even year -- for a bank’s results.

“It’s a traumatic experience for companies with large” amounts of such assets, said Robert Willens, an independent tax and accounting expert in New York. “In one fell swoop, a significant part of their net worth goes up in smoke.”

Among other things, Trump's major tax policy proposals for businesses include slashing the corporate tax rate to 15% from 35%, providing a one-time repatriation holiday of 10% for cash held overseas and allowing businesses with manufacturing operations in the United States to expense capital expenditures.While it's unlikely that he'll get all of those proposals through Congress, even a rate reduction to 25% would result a meaningful earnings hit for the banks.

Trump and House Republicans, led by Speaker Paul Ryan, have proposed dramatic corporate tax-rate cuts -- part of what they pledge will be the biggest tax overhaul since President Ronald Reagan’s era. Trump has called for cutting the rate to 15 percent, while the House Republican “blueprint” for tax changes proposes 20 percent.

It’s unclear which rate might prevail -- or whether a deal might be reached for a wholly different rate. Amid that uncertainty, some analysts and executives have calculated the potential effects of a 25 percent rate -- roughly the average corporate tax rate of the 34 members of the Organization for Economic Cooperation and Development.

Even if the U.S. corporate rate declines to 25%, Citigroup could have to take an earnings hit of $12BN while Bank of America, Wells Fargo and Goldman would all be looking at multi-billion dollar writedowns as well.

At a 25 percent rate, Citigroup would be required to lower its earnings by $6 billion to reflect the reduced value of its tax-deferred assets, John Gerspach, the bank’s chief financial officer, told investors at a conference hosted by Bank of America on Nov. 16.

But that could change if a Republican call for exempting overseas corporate earnings from U.S. taxation is enacted as part of the tax overhaul. Under that scenario, Gerspach said, Citigroup would have to write down as much as $12 billion -- because a large part of its deferred tax assets consist of unused foreign tax credits.

Calculations by Brian Kleinhanzl, a financial-sector analyst at KBW, show that at a 25 percent corporate tax rate, Bank of America would face a $6.6 billion write-down, while Wells Fargo’s would be $4 billion. Goldman Sachs Group Inc.’s would be $1.6 billion, according to KBW’s estimates.

Meanwhile, Fannie and Freddie could also be looking at write-downs of over $15BN in aggregate. According to KBW, that level of earnings hit may be sufficient to trigger the need for another capital infusion from the Treasury Department.

The implications might also reach mortgage giants Fannie Mae and Freddie Mac, which could see write downs of $10 billion and $5.4 billion respectively, according to a Nov. 27 KBW research note. Those hits would be large enough to potentially require both of them to seek a new infusion of money from the Treasury Department, the note said. Peter Garuccio, a spokesman for the Federal Housing Finance Agency, which oversees the government-backed lenders, declined to comment.

Of course, in reality these 1x charges will most likely be dismissed by investors, to the extent they don't trigger incremental capital requirements, as the long-term impact of lower tax rates is universally positive for corporate cash flow.Meanwhile, companies with deferred tax liabilities, including AT&T and Apple, will enjoy the reciprocal benefits of 1x paper gains.

“Over time, any impact will be offset by lower rates,” said Jerry Dubrowski, a spokesman for Bank of America. Ancel Martinez, a spokesman for Wells Fargo, declined to comment. “It is impossible for us to comment until we have seen legislative detail,” said Jake Siewert, a Goldman Sachs spokesman.

To be sure, any federal tax overhaul might include rules allowing companies more time to generate taxable income and fully harvest their deferred tax assets. Also, the one-time hit to earnings would be followed by higher income over the longer term, which would allow many banks to build capital faster.

“Long-term, it’s positive, because companies will report increased earnings-per-share,” said KBW’s Cannon. “Short-term, tax reform won’t have as large a positive effect on banks -- Citi is the 800-pound gorilla.”

The short-term bad news has a financial flipside: Companies with so-called deferred tax liabilities -- future tax bills that they now expect to pay at the 35 percent rate -- would get a sudden windfall if the corporate rate is cut. Winners would include AT&T Inc., which could see an immediate, one-time earnings boost of as much as $30 billion, and Apple Inc., which could see an extra $15 billion, Willens said. AT&T’s tax liabilities stem from depreciation and amortization tied to investments in equipment, he said, while Apple’s relate to anticipated U.S. tax bills on overseas earnings.

Like all other financial news these days, the market's ultimate takeaway from Trump's tax plan will be to buy more of everything...that said, you have to appreciate the irony here.