Australia's Westpac says new bank levy will add $48 mln in costs

Australia's Westpac says new bank levy will add $48 mln in costs

Australia's four biggest lenders on Monday launched a strongly worded attack on the government's new levy on big banks, estimating almost A$1 billion (US$745.00 million) in additional annual costs between them.

The lender said on Monday the 0.06 per cent levy is expected to apply to $615 billion of liabilities when it kicks in on July 1, which works out at about $260 million after tax on an annualised basis.

"No company can simply "absorb" a new tax, so consideration is being given to how we will manage this significant impost on the bank", Westpac said in a letter to shareholders that was posted on the ASX.

In a sign they are increasing their political campaigns against the tax, their chairmen also wrote to shareholders criticising the levy and highlighting the potential impact on dividends.

Banks have opposed the tax announced in the federal budget on May 8, with Commonwealth Bank of Australia (CBA), Westpac Banking Corp, National Australia Bank Ltd (NAB) and Australia and New Zealand Banking Group Ltd (ANZ) now putting a number on costs they say will be borne by customers and shareholders.

Prime Minister Malcolm Turnbull is confident about the accuracy of Treasury calculations his government's new bank levy will raise $1.5 billion annually. Now only Westpac, Commonwealth Bank, ANZ Bank, National Australia Bank and Macquarie Group will be targeted by the 0.06 percentage point charge on bank borrowings. "Based on Westpac's 2016 full year dividends of 188 cents per share, this represents 4.3% of dividends paid".

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To address the issue, Westpac suggested that a "sunset clause" should be included in the levy.

The government can secure the passage of the bank tax legislation with the nine Greens plus one other of the Senate crossbenchers. "It must passed on somewhere", Mr Henry said.

The government's levy is essentially a quid pro quo in exchange for the liquidity guarantee the Reserve Bank extends to Australia's big banks...

Mr Turnbull and Finance Minister Mathias Cormann earlier on Monday all but ruled out a call from crossbench Senator Nick Xenophon for the levy to be extended to big foreign banks operating in Australia.

"Foreign banks were first encouraged into the Australian market, for very good reasons, by Paul Keating in order to ensure that we had increased competition in the banking system".

The Prime Minister said the levy would apply to foreign banks if they reached the $100 billion liability threshold.

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