Major reveals damage as speculation over rate hikes and bank criticism of government intensifies
Major reveals damage as speculation over rate hikes and bank criticism of government intensifies
The new bank levy included in the Federal Budget will cost Westpac $260m, the bank announced yesterday.
The 6 basis point levy on bank liabilities will reduce the major bank’s net profit after tax by around $260m for the 2017-2018 financial year. If the bank is unable to raise profits that would mean a cost to shareholders of $0.08, or around 4.8% of dividends paid.
“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 warn “We plan to consult with stakeholders, including shareholders, on the levy.”
Westpac’s announcement comes amid increasing speculation that banks will pass on the levy through rate hikes. Last week AFG called for the ACCC to hold back the banks, with AFG interim CEO David Bailey argued that “history suggests the big banks will undoubtedly pass this new cost on. The extent to which they are able to pass this levy on will depend on how strong our regulators are with the new supervisory powers also announced on budget night.”
Whilst avoiding the question of rate hikes, the Australian Bankers Association has continued to criticise the Treasury’s implementation of the new tax. “A bad tax has now become a secret tax” complained CEO Anna Bligh, on being told that banks are unable to report their discussions with the Treasury. “This is likely to lead to highly flawed legislation, and further risks unintended consequences on the economy and financial system.”
The ABA has also been forced to deny a split between its major bank and non-major members after Adelaide and Bendigo Bank CEO Mike Hurst welcomed the levy, saying it would boost competition. Hirst later said that “from time to time there are occasions where banks have different views and different commercial interests. However, 99% of the time we agree.”
The new bank levy included in the Federal Budget will cost Westpac $260m, the bank announced yesterday.
The 6 basis point levy on bank liabilities will reduce the major bank’s net profit after tax by around $260m for the 2017-2018 financial year. If the bank is unable to raise profits that would mean a cost to shareholders of $0.08, or around 4.8% of dividends paid.
“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 warn “We plan to consult with stakeholders, including shareholders, on the levy.”
Westpac’s announcement comes amid increasing speculation that banks will pass on the levy through rate hikes. Last week AFG called for the ACCC to hold back the banks, with AFG interim CEO David Bailey argued that “history suggests the big banks will undoubtedly pass this new cost on. The extent to which they are able to pass this levy on will depend on how strong our regulators are with the new supervisory powers also announced on budget night.”
Whilst avoiding the question of rate hikes, the Australian Bankers Association has continued to criticise the Treasury’s implementation of the new tax. “A bad tax has now become a secret tax” complained CEO Anna Bligh, on being told that banks are unable to report their discussions with the Treasury. “This is likely to lead to highly flawed legislation, and further risks unintended consequences on the economy and financial system.”
The ABA has also been forced to deny a split between its major bank and non-major members after Adelaide and Bendigo Bank CEO Mike Hurst welcomed the levy, saying it would boost competition. Hirst later said that “from time to time there are occasions where banks have different views and different commercial interests. However, 99% of the time we agree.”
