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Macquarie says bank levy hits it hardest

Simone Ziaziaris  |  27 Jul 2017Text size  Decrease  Increase  |  

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SYDNEY - [AAP] Macquarie Group (ASX: MQG) expects to make another annual profit of around $2.2 billion despite the impact of the federal government's new bank levy.

The banking and financial services group said its performance in the first quarter of its 2017/18 fiscal year, which ends in March, was in line with expectations--stronger than a year ago but weaker than the final quarter of its 2016/17 year.

Macquarie said it benefited from improved trading conditions in its commodities and global markets operations, and growth continued in its banking and financial services operations, particularly in mortgages, deposits, and business banking.

The company has forecast an annual profit broadly in line with the previous year's record $2.2 billion.

Speaking at Macquarie's annual general meeting, chairman Peter Warne said the federal government's bank levy will have an estimated pre-tax annual cost of $66 million, effectively raising Macquarie Bank's tax rate from 34 per cent to 41 per cent.

The levy applies to non-retail deposit liabilities held by Australia's big four banks and Macquarie Bank.

"The new tax will have a disproportionately higher impact on Macquarie Bank compared to the major Australian banks given our business mix is more heavily weighted to wholesale and international business," Mr Warne said.

Approximately one third of Macquarie Bank's earnings in 2016/17 were generated by its Australian operations, Mr Warne said, and the bank has a market share of about 2 per cent on most Australian banking products.

"Given the relatively small size of our Australian banking business we were surprised by our inclusion in the group to pay this levy," he said.

"We have also expressed our concern to the government given the benefit we bring to domestic competition and innovation, the role we play in bringing offshore income into the Australian economy, and the potential for unintended consequences resulting from the levy."

Macquarie Group also said it has sufficient surplus capital to be able to accommodate newly announced capital requirements.

The Australian Prudential Regulatory Authority has requested the major lenders increase their Tier 1 capital ratios to 10.5 per cent by January 2020.

Macquarie shares were up $1.20 at $87.53 at 1255 AEST.

 

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