Banks lose $14 billion off share price following banking levy announcement

NEARLY $14 billion was wiped off banking stocks before the announcement of a Budget tax hike. Now some are saying they smell a rat.

Banking shares tumbled on Tuesday amid rumours of a levy.

THE big four banks had nearly $14 billion wiped from their share price on Tuesday amid speculation details of the multi-billion banking levy included in the Federal Budget was leaked.

Shortly after the lockup ended, Victorian Senator Derryn Hinch tweeted: “Bank Budget levy not the story. It’s the leak. Took $14b off bank stocks. Thought it was a secret lockup? Will be contacting AFP tmrw.”

The Australian’s political correspondent David Crowe said: “Bank shares fell heavily before new $6.2 billion levy announced. Who blabbed? #Budget 2017”

Bank Budget levy not the story. It’s the leak. Took $14b off bank stocks. Thought it was a secret lock-up? Will be contacting AFP tmrw.

— Derryn Hinch (@HumanHeadline) May 9, 2017

Bank shares fell heavily before new $6.2 billion levy announced. Who blabbed? #Budget2017

— David Crowe (@CroweDM) May 9, 2017

Combined, Australia’s big four saw $14 billion wiped from the market with investors nervous about what an impending levy might mean.

By the end of the day, Commonwealth Bank shares fell 2.77 per cent despite positive third-quarter cash earnings data. ANZ shares dropped 2.09 per cent, while NAB and Westpac fell 1.59 per cent and 2.7 per cent respectively.

The losses dragged the benchmark S & P/ASX200 down 0.45 per cent offsetting gains from the major miners and energy companies.

MORE: How the Federal Budget will affect you

Earlier, optionsXpress analyst Ben Le Brun told AAP: “There’s speculation ahead of tonight’s budget that there may be a new levy aimed at the big four banks,” while CBA suffered its biggest one day hit in nearly two years.

Budget information is held under top secret security with journalists required to surrender mobile phones until a 7:30pm deadline when it is unveiled by the Treasurer. However key information is often selectively leaked as a way of teasing positive policies and softening the blow or road testing controversial ones.

https://www.facebook.com/news.com.au/videos/1728611813832851/?utm_content=SocialFlow&utm_campaign=EditorialSF&utm_source=News.com.au&utm_medium=Twitter

The banking levy will see a $6.2 billion levy on the big four banks, plus Macquarie, over four years plus extra controls and penalties to foster accountability.

Treasurer Scott Morrison said it would add “an additional and fair contribution from our major banks” and even the playing field. He said it would mean banks “can’t go and lie to customers.”

“This is not a levy on their deposits. This is not a levy on their mortgages. Banks can jack up prices on their customers any day ... if they do, take your money somewhere else, take your money to a regional or smaller bank.”

However the banks have hit back hard, calling it a “political tax grab to cover a budget black hole.”

Australian Bankers’ Association Chief Executive Anna Bligh said the “naive and misguided move” could hurt ordinary Australians.

“It is a tax that will hit Australians by hurting investment and could have unintended consequences,” she said.

“Contrary to the Government’s claim that the tax will only be levied on banking liabilities, the reality is that it will affect the entire banking system.

“Market speculation about this new tax just today stripped around $14 billion from the value of life savings and superannuation accounts of ordinary Australians after bank shares plummeted.”

PM Malcolm Turnbull and Treasurer Scott Morrison have announced a raft of measures to hit banks for revenue and create more accountability: Picture Kym Smith

Shadow Treasurer Chris Bowen called it “the most hypocritical act in modern Australian political history,” but said Labor would support it.

“We will not stand in the way of it … The government has to explain these measures … it’s not how I would design it necessarily but we have to be responsible.”

.@Bowenchris: The bank levy is the most hypocritical act in modern Aust political history, but Labor will support it https://t.co/i9NLwAjnID pic.twitter.com/Ibe44z5wPP

— Sky News Australia (@SkyNewsAust) May 9, 2017

Accountancy firm PricewaterhouseCooper’s CEO Luke Sayers said the government would have to be careful because similar plans overseas had led to mixed results.

“Bank levies have been tried in other jurisdictions and have created complexity, either acting as a handbrake on investment and jobs or encouraging those with the ability to do so to focus their operations elsewhere,” he said.

Preliminary modelling from the company showed if passed on to businesses and consumers it could reduce GDP by around $2.5 billion over four years and lead to 6200 fewer jobs.

Originally published as Banks lose $14 billion off share price following banking levy announcement