Aussie Banks Start to Detail Cost of Levy, Step Up Criticism

Updated on
  • Levy is ‘bad policy’ that will help foreign banks: Westpac
  • Limited options on how to handle levy: National Australia

Four of Australia’s biggest lenders gave estimates of how much Australia’s new bank levy will cost them, as they stepped up criticism of the policy and vowed again to pass on the extra charges.

Westpac Banking Corp. said the levy will cost it an annual A$260 million ($194 million) after tax, while Commonwealth Bank of Australia estimated A$220 million and National Australia Bank Ltd. A$245 million, according to separate filings to the stock exchange. Australia & New Zealand Banking Group Ltd. put the cost at A$240 million, though Macquarie Bank Ltd. -- the other affected lender -- has yet to post an estimate.

The government said it expects the levy -- a surprise announcement in this month’s budget -- will raise A$6.2 billion over the next four years. It will apply to banks with liabilities of more than A$100 billion and won’t impact either regional lenders or foreign banks operating in Australia.

“This new tax is bad public policy -- an inefficient tax -- that targets just five companies who are already among the largest taxpayers in Australia,” Westpac said in a letter to shareholders.

Treasurer Scott Morrison has urged the banks to absorb the additional cost, but the lenders said they are looking at ways to pass it on.

Westpac said its preliminary estimate is the 0.06 percent levy will apply to A$615 billion of its liabilities, costing A$370 million a year, or A$260 million after tax deductions. The charge will flow through to customers, shareholders, suppliers and staff, Westpac said. “No company can simply ‘absorb’ a new tax, so consideration is being given to how we will manage this significant impost.”

Westpac reported an unaudited cash profit of A$7.82 billion for the year ended Sept. 30.

Foreign Banks

In its letter to shareholders, Westpac said it was calling on the government to expand the tax to foreign banks to ensure it isn’t “competitively disadvantaged,” and to introduce a commitment to end the tax at the end of the current budget cycle in 2021.

Commonwealth Bank said it estimates the levy will amount to A$315 million a year, or A$220 million after tax. In a letter to shareholders, the Sydney-based lender also highlighted concerns about plans in the budget to give regulators a greater say over executive pay.

“The fact that regulators will be empowered to override your board calls into question the established fundamental governance framework which governs publicly listed companies,” Chairman Catherine Livingstone wrote.

National Australia Bank said it estimates the cost will be approximately A$350 million annually, or A$245 million after tax. Chairman Dr Ken Henry said in a letter to shareholders that while no decision had been made on how to manage the cost, the bank has “limited” options, adding that it could increase rates, invest less or see reduced profits hit shareholders.

ANZ estimated the levy would cost it A$345 million, or A$240 million after tax.

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