Westpac says bank levy will cost it $260ma year

Westpac says bank levy will cost it $260ma year

May 22 Australia's No.2 lender Westpac Banking Corp said on Monday a new bank levy would result in additional costs of A$65 million ($48.4 million) in the second half of the financial year ending September.

CBA's costing follows Westpac saying earlier on Monday that the new tax on the nation's five biggest banks would cost it about $260 million a year after tax. No company can simply "absorb' a new tax, so consideration is being given to how we will manage this significant impost on the bank".

In particular, Westpac decried the levy as an "inefficient tax" which "does not apply to foreign banks, giving them a competitive advantage and favouring foreign shareholders over Australian ones".

In a letter to shareholders, CBA said it was deeply concerned the tax would undermine its ability to deliver for shareholders.

Westpac chairman Lindsay Maxsted wrote to the bank's more than 600,000 shareholders reiterating the banking industry's criticism of the levy, and including estimates of how the profit could potentially affect dividends if banks are unable to offset the cost in other ways.

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

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Westpac stated this equates to around 8 cents per share in the first full year of the levy, and 4.3 per cent of dividends paid - based on its full-year dividends of 188 cents per share in 2016. But he also said that if the full impact were passed on to shareholders it would be equal to a dividend cut of 8c a share.

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

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". You know, I know and the government knows that a tax can not be "absorbed". Last week, Assistant Treasurer Michael Sukkar did not rule out including foreign banks and Queensland MP Andrew Laming says they should be taxed as well.

The Prime Minister said the levy would apply to foreign banks if they reached the $100 billion liability threshold, but "one of the foreign banks' Australian subsidiaries come to that level".

"The exact cost will depend on the final form of the new legislation passed and the composition of Westpac's liabilities", the bank noted in its statement to the ASX.

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