$14 billion wiped off big banks as new levy, fines add to pain

UPDATE: NAB has hit out at last night’s budgetary assault on the banking industry, with CEO Andrew Thorburn attacking the new major bank tax in a damning statement.

Westpac chief executive Brian Hartzer, ANZ chief Shayne Elliott, CBA chief Ian Narev and NAB chief Andrew Thorburn. Picture: AAP

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UPDATE: NAB has hit out at last night’s budgetary assault on banking industry, with CEO Andrew Thorburn attacking the new major bank tax in a damning statement.

In his statement, Mr Thorburn said the changes would affect millions of people, including 10 million customers, 570,000 NAB shareholders, 34,000 staff members and 1700 suppliers.

“The major bank tax will impact millions of everyday Australians who are employees, customers or shareholders of banks,” he said.

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“It is not just a tax on a bank. It is a tax on every Australian who benefits from, and is part of, our industry.”

The bank also reminded the government that it was Australia’s fourth-largest taxpayer, paying $1.2 billion in taxes.

“A tax cannot be absorbed. This tax is borne by these people. It is not possible to impose a tax without an impact on people, and therefore the wider community,” Mr Thorburn said.

NAB chief executive Andrew Thorburn has slammed the major bank tax. Photographer: Mark Graham/Bloomberg

“While we wait for further information about how this tax is proposed to work, our focus at NAB remains on supporting our customers during what is a critical time in the Australian economy.”

Investors have savaged Australia’s major banks, ripping $14 billion from their market value in anticipation of last night’s budgetary assault on the industry.

And the Turnbull government has lived up to the expectations, unveiling a new tax on the banks to rake in more than $1 billion a year, fresh restrictions on executive pay and civil fines of up to $200 million for corporate wrongdoing.

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The moves come despite the fact the government is relying on the big business to get the Budget back into surplus by 2020-21.

Despite some relief for smaller companies, the company tax take is forecast to grow to $95 billion in the 2021 financial year, up from $67.8 billion this year.

The brunt of the Budget reform agenda is being shouldered by the big four banks.

With profit margins already under pressure amid strong competition, the biggest five banks will now have to stump up an extra $6.2 billion over the next four years through a new bank levy.

Westpac chief executive Brian Hartzer, ANZ chief Shayne Elliott, CBA chief Ian Narev and NAB chief Andrew Thorburn. Picture: AAP

Treasurer Scott Morrison said recent reviews of the sector had found the biggest lenders were too concentrated at the expense of consumers. The government will apply a 0.06 percentage point levy on the big banks’ liabilities from July 1.

It will raise $1.6 billion next year, hitting the Commonwealth Bank, Westpac, National Australia Bank, ANZ and Macquarie.

After the tax was flagged on Tuesday morning, shares in the major banks all fell heavily.

The CBA suffered its biggest rout in more than a year, falling 3.9 per cent, while shares in the other major banks fell more than 2 per cent.

Collectively, $13.9 billion was wiped off the market value of the big four in the rout.

The government is also introducing a Banking Executive Accountability Regime run by the Australian Prudential Regulatory Authority.

This gives the regulator the chance to pursue civil penalties of up to $200 million against big lenders and $50 million against smaller ones.

Sixty per cent of remuneration for chief executive officers will be deferred for four years in an attempt to ensure those executives are held accountable. The threshold will be 40 per cent for other senior executives.

The moves came after the CBA revealed its net profit in the three months to March climbed from $2.4 billion to $2.6 billion, albeit while its net interest margin — a key measure of profitability — slipped.

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