Mathias Cormann rejects hitting foreign banks with tax

Cutting dividends is a sacrilegious act for bank investors, yet Westpac this morning warned that the assessed $260 million cost of the levy would have shaved around 8 cents per share off last year's full year dividend payout of 188 cents per share.

On an annualised basis, that represents about A$260 million after tax, equivalent to around 8 cents per share or 4.3 percent of dividends paid, Westpac said in a statement.

Senator Cormann insists there are no major foreign banks in Australia following calls from crossbench senator Nick Xenophon to include them in the policy.

Westpac is the first of Australia's big banks to unveil the impact of the government's new bank levy - and its not pretty.

"Consideration is being given to how we will manage this significant impost on the bank", Westpac says.

"However the actual cost will not be known until the final legislation for the tax has been passed and we can fully assess its impact on NAB's business", the NAB chairman, Ken Henry, said in a note to shareholders. You know, I know and the government knows that a tax can not be "absorbed".

As the banks piled on the political pressure on Monday, the Coalition and Labor continued to trade blows over the impact of the government's proposed bank levy in question time.

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

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On the basis of the above estimates, it would result in a new cost in our Second Half 2017 of approximately $65 million after tax.

The Prime Minister said the levy would apply to foreign banks if they reached the $100 billion liability threshold.

But it left untouched the ratings of Australia's five biggest banks, including Macquarie Bank.

At 1127 AEST, Westpac shares were up 29 cents, or 0.9 per cent, at $31.145. That translates to an annualized cost of AUD260 million.

Westpac earlier today announced the federal budget's new bank levy will cost about $370 million a year. Westpac reported an unaudited cash profit of A$7.82 billion in the year ended September 30.

In a sign of the banks' campaigns against the tax increasing, both banks also wrote to their hundreds of thousands of shareholders protesting against the levy, with CBA taking the unusual step of holding "town hall" meetings with shareholders over the tax.

Global rivals would not be subject to the levy, although HSBC is subject to the equivalent United Kingdom scheme.

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