Westpac says the government's new bank levy will hit its second-half profit by $65 million and will be the equivalent of a 4.3 per cent cut to dividend over a full financial year.
The lender said this morning the 0.06 per cent levy was expected to apply to $615 billion of liabilities when it kicked in on July 1, which works out at about $260 million after tax on an annualised basis.
Westpac paid a total $1.88 in dividends per share while making a $7.8 billion full-year profit in 2015-16, and said the $260 million charge worked out as 8 cents per security.
"No company can simply 'absorb' a new tax, so consideration is being given to how we will manage this significant impost on the bank," Westpac said in a letter to shareholders.
Westpac did not commit to a reduced dividend but chief executive Brian Hartzer has previously warned that shareholders are among those who could carry the cost.
Westpac, whose financial year ends on September 30, said it still had only limited detail about how the levy would function.
"Westpac has strongly objected to the levy on the grounds that it is an inefficient tax that targets just five companies; it places the major banks at a competitive disadvantage relative to international peers; and it is a tax on growth because as lending and investment increases the cost of the levy also rises," the bank said.
"A further objection is that the levy currently has no end date, so it becomes a permanent tax impost on companies that are already amongst Australia's largest taxpayers."
International rivals would not be subject to the levy, although HSBC is subject to the equivalent UK scheme.
Commonwealth Bank of Australia, meanwhile, said it expected the federal government's planned bank levy would cost it $220 million after tax per annum.
In a letter to shareholders, CBA said it was deeply concerned the tax would undermine its ability to deliver for shareholders.
Westpac shares were up 29 cents, or 0.9 per cent, at $31.14 this morning.
