Macquarie Group ponders moving offshore – The Australian Financial Review

Australia's largest investment bank, Macquarie Group, is not ruling out moving offshore in the wake of the imposition of the $6.2 billion bank levy but, as of yet, has made no final decision.

Macquarie, one of the five banks to be hit with the Major Bank Levy has vastly smaller retail operations in Australia than the big four and could more easily relocate it headquarters.

It did not rule out relocating after senior sources told The Australian Financial Review that Macquarie Bank executives had relayed to at least one of the major political parties it was canvassing options for relocating overseas following the announcement of the bank tax in the May budget.

Asked to respond, a Macquarie spokeswoman left open the option.

"As we have said over the years, Macquarie consistently looks at the most appropriate locations for its businesses and head office," she said.

"Whilst approximately two-thirds of our business is outside Australia, it remains a key market and is where over 6000 of our approximately 13,600 staff are employed."

Macquarie has operations in 28 other nations with large presences in London, Hong Kong, New York and Singapore.

It qualified for the bank tax because its Australian operations meet the threshold of having more than $100 billion in liabilities. An industry source said this could be reduced as part of any relocation.

Compared with the big four retail banks, Macquarie's domestic retail arm is small, contributing 11 per cent of its operating profit. Domestically, it is the eighth largest lender, with its mortgages accounting for just 2 per cent of market share. Similarly, its retail deposits account for just 2 per cent of market share.

It is understood this is not the first run-in Macquarie Bank has had with government.

Several years ago it had concerns with how the Australian Prudential Regulation Authority required it to hold extra capital against its expanding global operations.

If the bank were to relocate abroad, it would punch a hole in the revenue the Turnbull government has budgeted to raise from the tax, leaving it the option of increasing the rate or changing the structure of the tax to take more from the big four. the ANZ Bank, national Australia Bank, The Commonwealth Bank of Australia and Westpac.

Since the bank tax was announced, Macquarie has maintained a public silence but it, like the other banks, has been lobbying behind the scenes.

One source said its executives had informed politicians that while it had made no decision to relocate, it was drawing up options.

It did not release estimates of how much it expected to pay in the tax although it would be the smallest contributor of the five, with industry estimates putting its annual liability at about $70 million.

The big four have estimated that between them, they will pay $1.4 billion in tax as a gross figure and $965 million net. The tax is forecast to raise $1.6 billion in its first year, 2017-18. Both Prime Minister Malcolm Turnbull and Treasurer Scott Morrison are confident the forecast revenue will be raised, suggesting that the bank estimates were on the low side.

The government has so far been unperturbed by the anger shown by the banks, believing it to be bluff and bluster. It argues the banks can easily afford the tax that amounts to about $1.5 billion a year out of combined profits of more than $30 billion.

On Thursday, the Financial Review reported growing concern in the sector at what it perceived at being demonised by the government, as well as the Opposition, and how this had the potential to damage investor confidence.

Macquarie is an icon of Australia's investment banking industry and is the only major Australian bank to have made major inroads into Wall Street.

Macquarie is an asset management firm and investment bank. The largest share of the company's earnings come from the asset management arm, which largely manages infrastructure assets.

In Singapore, Macquarie's business operations span deal advisory and capital markets, asset finance, asset management, research and trading and warrants. Macquarie operates in 11 markets in Asia and employs 3450 people across its offices in the region. The company's Asia-based workforce is the second largest outside Australia which employs 6136 staff.

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Macquarie Group ponders moving offshore - The Australian Financial Review