Big banks hammered in early trade

Shares in Australia’s big four banks — the parent companies of ANZ, Westpac, ASB and BNZ in New Zealand — took an early hammering on markets yesterday following plans by Malcolm Turnbull’s coalition Government to impose a new tax. But they stabilised later in the day as investors assessed the long-term costs.

Australian Treasurer Scott Morrison introduced the levy on Australia’s five biggest banks — Westpac, ANZ, Commonwealth, National Australia Bank and Macquarie Group — in yesterday’s budget, saying it was a “fair contribution” that would help competition and budget repair.

After shedding some A$14 billion of value on Tuesday on speculation about the move, the sell-off continued yesterday morning with ANZ, Westpac, Commonwealth Bank of Australia and the National Bank of Australia all initially down between 1 and 2 per cent.

Banks with liabilities of more than A$100b, which is currently the big four lenders and Macquarie, will be hit with a levy of 0.06 per cent on those liabilities each year from July 1. The new levy is expected to reap A$6.2b in revenue for the Australian government over the next four years.

Patersons Securities economist Tony Farnham told AAP the levy had unnerved investors.

“It was leaked to market [on Tuesday] which caused a selloff [Tuesday] afternoon,” he said. “That has been added to . . . as people try to work out the ramifications of some of their profits going to tax.”

Farnham said the banks may have to cut dividends or increase interest rates to maintain their current profit levels.

The Australian Financial Review quoted Deutsche Bank analyst Andrew Triggs saying the levy would hit bank profits by between 3 and 6 per cent.

ANZ would be hit hardest because it was less profitable and had a higher share of foreign deposits. It could have to pay A$417 million, or 5.9 per cent, of its 2018 profits, Triggs said. Commonwealth Bank could have to pay 3.9 per cent of profits, NAB, 4.9 per cent and Westpac 3.9 per cent.

In New Zealand where big bank stocks ANZ and Westpac are listed on the NZX, shares were initially down between 2 and 3 per cent.

But by the close of New Zealand trading they were down just 0.06 and 1.39 per cent respectively.

Finance Minister Steven Joyce’s office yesterday said there were no plans for a similar tax in this country.

NZ Bankers Association chief executive Karen ScottHowman was keen to differentiate the local operators from their Australian parents.

“New Zealand banks operate in a different environment from those in Australia,” Scott-Howman said. “Here we have strong and independent regulators, a very competitive banking sector and high levels of customer satisfaction.”