ASX bank shares are down on the news that a new bank levy could hurt profits.
New regional bank levy?
According to reporting by the Australian Financial Review, a Treasury report suggests a new bank levy which aims to ensure banking access for regional communities.
Banks have been closing a large number of branches in regional areas in the last several years, so Treasury wants to implement a regional banking service obligation regarding branches and ATMs, depending on the size of a bank’s household deposits.
Money raised from underrepresented banks in the regions would be paid to financial institutions that do provide services.
The AFR reported that based on the initial proposed formula, Commonwealth Bank of Australia (ASX: CBA) would be liable for a $75 million levy, Macquarie Group Ltd (ASX: MQG) would need to pay a $75 million levy, ING would pay a $60 million levy, ANZ Group Holdings Ltd (ASX: ANZ) would need to pay a $30 million levy and HSBC would have to pay a $20 million levy.
Those would be the proposed losers, but there would also be a few winners. For example, Bendigo and Adelaide Bank Ltd (ASX: BEN) would reportedly get receive $200 million and National Australia Bank Ltd (ASX: NAB) would receive $75 million thanks to its farming banking business presence in the regional areas. Rabobank would be another beneficiary.
It was also reported that if banks are deemed to have a shortfall of regional services, they could buy credits from banks with a larger regional footprint.
However, it was noted by a government source that this Treasury consultation is at an “early stage and no policy decisions have been made”.
My thoughts on this
This is just a suggestion at this point, nothing has been made law.
I do believe that regional customers need to be able to access in-person banking services, but it is curious that digital banks are effectively being punished for not having a physical presence in regional areas. Lower costs is one of their main advantages to challenge the big banks. Interestingly, ANZ’s acquisition of Suncorp Bank came with a promise it wouldn’t close branches for a few years.
For me, if this levy was implemented, it would give Bendigo Bank an attractively significant boost, but we can’t rely on that financial boost to be permanent.
Overall, it would make most other ASX bank shares less attractive to me.
