NAB Leads Decline in Bank Shares After Bank Levy ReportNarayanan Somasundaram
National Australia Bank Ltd. led a decline in the country’s bank shares after the Australian Financial Review reported that the government plans a new deposit insurance levy.
National Australia ended 1.6 percent lower at A$30.73 in Sydney. Commonwealth Bank of Australia lost 1.5 percent, Australia and New Zealand Banking Group Ltd. dropped 1.2 percent and Westpac Banking Corp. slipped 0.1 percent. The benchmark S&P/ASX 200 Index gained 0.2 percent.
In an economic statement tomorrow, the government will propose a levy of between 0.05 percent to 0.1 percent, the AFR reported, without saying where it got the information. Australia currently guarantees deposits of up to A$250,000 without charging banks, it said.
Prime Minister Kevin Rudd, who trails in polls to Tony Abbott’s Liberal-National coalition, is building a policy platform before an election. Treasurer Chris Bowen is preparing a budget update as declining tax revenue and lower export prices threaten the government’s projections of a return to balance in 2015-16.
“Slapping a deposit insurance levy is the government’s way of plugging a budget hole,” said Chris Weston, chief market strategist at IG Markets Ltd. in Melbourne. “The banks are going to be unhappy about this as they’d think they don’t actually need a bailout.”
Bowen is consulting about the need for a deposit protection fund, Finance Minister Penny Wong told reporters today when asked about the report.
“The IMF and the RBA have put a view to the government about the need for a fund to cover deposit protections and the treasurer has made clear he is consulting on that,” Wong said. Media speculation before any budget update is often inaccurate, she added, and declined to comment further on the report.
Stephen Ries, a spokesman for Melbourne-based ANZ, and Steve Batten, a Sydney-based spokesman for Commonwealth Bank, declined to comment. National Australia’s Chief Executive Officer Cameron Clyne told a conference in Sydney that he would discuss any proposed levy with the government before commenting.
A spokesman for Westpac couldn’t immediately be reached for comment. Heather Wellard, a spokeswoman for the Australian Bankers Association, didn’t have an immediate comment.