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”

Commonwealth Bank and NAB have joined Westpac in warning shareholders about the Coalition's $6.2bn bank levy, saying it will cost them hundreds of millions of dollars each after tax this year.

Westpac expects to take a $260 million annual cost hit as a result of the government's bank levy, the lender told investors on Monday.

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.

In a 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 sunset clause so the tax stops at the end of the current budget cycle in 2021. Nevertheless, given information received to date, we are able to provide preliminary estimates of the cost of the Levy for Westpac.

"No company can simply "absorb" a new tax???the impact of higher costs ultimately flows through to customers, shareholders, suppliers, staff, or some combination of all four".

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Mr Maxsted stressed no decision had been made on what Westpac would do with the levy.

"Based on Westpac's dividends in full year 2016 of 188 cents per share, this would represent 4.3% of dividends paid". Now only Westpac, Commonwealth Bank, ANZ, National Australia Bank and Macquarie Group will be targeted by the 0.06 percentage point charge on bank borrowings.

Asked by journalists if he was confident in raising the $1.5 billion between the big four and investment bank Macquarie, Mr Turnbull said: "We've relied on the forecasts from Treasury".

He said that still held and no foreign bank operating in Australia "is a major bank in Australia".

The government can secure the passage of the bank tax legislation with the nine Greens plus one other of the Senate crossbenchers.

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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...

This included the likes of AMP, Bank of Queensland and Bendigo and Adelaide Bank.

It said the Commonwealth Bank, Westpac, NAB, and ANZ could assume "timely financial support" from the Australian government in the event of a sharp correction, giving them an advantage.

Westpac earlier today announced the federal budget's new bank levy will cost about $370 million a year.

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