The big banks insist that someone will have to pay for the new levy announced in the 2017 budget.
Either shareholders will have to accept lower dividends or bank customers will have to pay more for bank services, including home loans.
Treasurer Scott Morrison says the banks should absorb the costs of the levy and urged people to move to smaller banks if they get hit with high mortgage payments.
Analysts say the levy, adding up to about $1.6 billion a year, will strip several percentage points from the annual profits of the big four — Commonwealth, Westpac, NAB, ANZ — and Macquarie.
However, Ord Minnett, in a research note to customers, says the 3% to 4% drag on bank earnings probably won’t materialise.
“We expect the banks will inevitably re-price loans to mitigate this impact,” says Ord Minnett.
“In our view, the re-pricing across the portfolio (6 to 10 basic points) will not provide sufficient switching incentive to ‘level the playing field’ with smaller institutions.”
Here is Ord Minnett’s forecast for earnings impact, and the necessary interest rate rises to cover the hole, from the major bank levy:
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