Tag: Motley Fool

The Medibank Private Ltd (ASX: MPL) share price is down in the dumps this morning amid news the health insurance provider’s tech boss has announced his retirement.

Right now, the Medibank share price is down 1.55%, trading at $3.18.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is also in the red, falling 0.44%.

Let’s take a closer look at the latest news from the Aussie health insurance giant.

Medibank tech executive to hang up their hat

The Medibank share price is tumbling on Friday. Its suffering comes amid news the company’s technology and operations executive John Goodall will retire next month.

Goodall has overseen the company’s technology, property, procurement, and operations since December 2016.

His retirement comes just months after Medibank suffered a major cyber-attack, resulting in a $26.2 million bill.

The company is now on the hunt for a new tech executive, looking both inside the business and externally for the right candidate.

In the interim, current senior executive for core Medibank customer systems, Kylie Williamson will take on the role. She has more than 30 years of tech experience.

Commenting on Goodall’s retirement, CEO David Koczkar said:

I want to take this opportunity to thank John for his significant contribution to our business over the past six years and we all wish him well in his retirement.

The Medibank share price isn’t alone in the red today. The company’s home sector – the S&P/ASX 200 Financials Index (ASX: XFJ) – is down 0.87% at the time of writing.

Medibank share price snapshot

The Medibank share price has outperformed the broader market in recent months despite facing plenty of turbulence.

The stock has gained 9% so far this year. It’s also trading 4% higher than it was this time last year.

Meanwhile, the ASX 200 is trading flat year to date and has dropped 6% since this time last year.

The post Medibank share price slumps as tech boss announces departure appeared first on The Motley Fool Australia.

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More reading

• ‘Increased confidence’: Alphinity reveals 2 ASX 200 shares it just bought
• Latitude shares are back on the ASX, but why are they falling 8% today?
• 2 beaten-up ASX dividend shares I’d buy for long-term income
• Medibank share price edges lower amid $31 million joint venture news
• 2 leading ASX 200 shares to buy that could keep outperforming in 2023: fund manager

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Weebit Nano Ltd (ASX: WBT) share price has returned from its trading halt and sunk deep into the red.

In morning trade, the semiconductor company’s shares are down 12% to $4.89.

Why is the Weebit Nano share price sinking?

The weakness in the Weebit Nano share price has been driven by the company undertaking and completing an institutional placement.

According to the release, the company has raised $45 million via fully underwritten institutional placement at a 9.7% discount of $5.00 per new share.

Management advised that the proceeds of the offer will fund the further development and commercial roll-out of Weebit Nano’s ReRAM technology. It also expects it to support further development to solidify its competitive advantages in both the embedded and discrete markets.

In addition, management notes that the funds will allow Weebit Nano to capitalise on the significant opportunities within the Non-Volatile Memory (NVM) market as it progresses its commercialisation strategy with leading global foundries and potential customers.

The company will now seek to raise a further $10 million from retail investors at the same price via a share purchase plan.

Management commentary

Weebit Nano’s CEO, Coby Hanoch, commented:

The strong level of support shown by new and existing sophisticated and institutional investors in Australia and offshore reflects our technical progress over the past year and the significant market opportunities for our proven innovative memory technology. We are delighted to welcome new institutional investors to our register from Australia and offshore, and take great pride that these experienced technology investors are supporting Weebit’s ground-breaking technology.

Hanoch appears optimistic that the funds raised will be a big boost to its future plans. He adds:

Our first ReRAM product is now available to customers through SkyWater Technology, and we are in advanced discussions with most of the world’s leading fabs and integrated device manufacturers. Funds raised, combined with our strong balance sheet of approximately $45 million cash at the end of December 2022, ensure we are well-placed to transfer and qualify our ReRAM technology in Tier-1 fabs and foundries to capitalise on the growing global need for faster, better performing memory technology. Our ReRAM has already demonstrated it is able to scale to smaller geometries for more advanced applications, and has significant competitive advantages over both the existing memory technology and other emerging players.

Time will tell if this is another meme stock like Brainchip Holdings Ltd (ASX: BRN), or something with more substance.

The post Why is the Weebit Nano share price sinking 12% today? appeared first on The Motley Fool Australia.

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More reading

• Why is the Weebit Nano share price frozen?
• Why Mesoblast, PolyNovo, Pushpay, and Weebit Nano shares are charging higher
• Why InvoCare, Pentanet, Sayona Mining, and Weebit Nano shares are storming higher
• Weebit Nano share price just surged 7% on product commercialisation news
• Down 17% in 2 days, has the dream run for Weebit Nano shares finally ended?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Block Inc (ASX: SQ2) share price is on course to end the week on a very disappointing note.

In morning trade, the payments company’s shares are down 15.5% to $91.99.

Why is the Block share price crashing?

Investors have been selling down the Block share price on Friday after the company was the subject of a short seller attack from Hindenburg Research.

Hindenburg Research was the short seller behind the recent Adani Group attack.

It has now turned its attention to Block, alleging that its key Cash App business has inflated user metrics, facilitates fraud, and lacks strong compliance controls.

What is being said?

After a two-year investigation, the research firm claims to have found that Block systematically took advantage of demographics it was said to be helping. It summarises:

Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping. The “magic” behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics.

Inflated user metrics

In respect to its user metrics, Hindenburg Research believes the company is “wildly” overstating its numbers. It commented:

Most analysts are excited about the post-pandemic surge of Block’s Cash App platform, with expectations that its 51 million monthly transacting active users and low customer acquisition costs will drive high margin growth and serve as a future platform to offer new products.

Our research indicates, however, that Block has wildly overstated its genuine user counts and has understated its customer acquisition costs. Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.

Its analysts suggest that this has been driven by its focus on the underbanked. It adds:

Core to the issue is that Block has embraced one traditionally very “underbanked” segment of the population: criminals. The company’s “Wild West” approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly.

Hindenburg did some tests to see how easy it was to create fake accounts. Unfortunately, it was far easier than you would hope. It commented:

To test this, we turned our accounts into “Donald Trump” and “Elon Musk” and were easily able to send and receive money. We ordered a Cash Card under our obviously fake Donald Trump account, checking to see if Cash App’s compliance would take issue—the card promptly arrived in the mail.

What now?

As things stand, Block has not responded to the 50-page short seller report.

Until it does respond and disprove these allegations, it seems quite likely that the Block share price will remain under pressure. Let’s hope a response comes soon!

The post Block share price crashes 15% after scathing short seller attack appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• The Block share price just plummeted 6%. Here’s why
• Here are the top 10 ASX 200 shares today
• Why is the Zip share price soaring 7% today?
• Why is the Block share price racing higher on Wednesday?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Washington H Soul Pattinson and Co Ltd (ASX: SOL) could be the market’s most consistent dividend share.

Not only is it the only All Ordinaries Index (ASX: XAO) stock to have paid a dividend every year since listing (way back in 1903, I might add), but it’s also grown its offerings every year for the last 23 years.

And the investment house kept its track record alive yesterday when it declared a 36 cent per share interim dividend. That marked a 24% jump on that of the prior comparable period.

No doubt the news piqued the interest of many passive income investors. So, without further ado here are all the need-to-know details regarding the S&P/ASX 200 Index (ASX: XJO) staple’s upcoming payout.

The Soul Patts share price last traded at $28.91.

All the details on Soul Patts’ record interim dividend

The Soul Patts share price jumped 1.3% on Thursday after the company declared a 36-cent per share interim dividend – a new record for its kind.

The offering will be fully franked, meaning it could bring tax benefits to some investors.

The ASX 200 share will trade ex-dividend on 19 April with the payout hitting bank accounts from 12 May.

Investors need to be on board the stock before its ex-dividend date in order to qualify to receive the dividend.

The company pays dividends out of its net cash flows from investments. They jumped 35% last half to reach $246.5 million on higher dividends from its strategic portfolio and contributions from Milton.

Looking longer-term, those holding Soul Patts shares have seen their interim dividends realise a compound annual growth rate (CAGR) of 9% over the last two decades.

In that time, the investment house has brought about a total shareholder return of 12.3% per annum.

Considering its newly declared interim dividend and its recent final dividend, Soul Patts shares currently offer a 2.73% dividend yield.

The ASX 200 giant will likely reveal its next final dividend alongside its full year earnings in late September.

The post Looking to bag the bolstered Soul Patts dividend? Here’s what you need to know appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Friday
• Telstra shares: Bull vs. Bear
• Here are the top 10 ASX 200 shares today
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• Here are the 3 most heavily traded ASX 200 shares on Thursday

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In my view, a few sectors have been oversold in the last 18 months. That leads me to believe that there are cheap ASX shares, which could also be payers of huge dividend yields. A few could deliver a passive income of more than 10%.

I think the retail sector can be a hunting ground for finding beaten-up opportunities. There are plenty of retailers that are likely to see cyclical demand over the years. If we use periods of market distress to pick up ASX retail shares that are down heavily, they could be among the ones that rebound nicely in the medium term.

Sometimes share prices seem to be heavily focused on the next 12 months or so, not on the longer-term potential. I think this opens up the opportunity to find names that can do well for investors.

Dusk Group Ltd (ASX: DSK)

The ASX share describes itself as a retailer of home fragrance products, selling Dusk-branded products which are designed in-house and exclusive to Dusk. It claims to become the Australian leading retailer of home fragrance products. It sells a number of different products like candles, ultrasonic diffusers, reed diffusers, essential oils and fragrance-related homewares.

Over the past year, the Dusk share price is down around 40%. Commsec numbers suggest that Dusk could generate earnings per share (EPS) of around 20 cents in FY23. This would represent a large profit decrease from FY22. However, it suggests that Dusk shares are currently valued at less than 8 times FY23’s estimated earnings.

On top of that, Dusk had net cash of $32.9 million on its balance sheet at the end of the FY23 first half. According to the ASX, its market capitalisation is currently $93 million, so it looks even cheaper when taking that into account.

In terms of the dividend, it’s expected to be 14 cents per share in FY23 and then rise in FY24 and FY25. At the current Dusk share price, the grossed-up dividend yield could be 13.3%. But that’s just an estimate of the potential passive income.

Ongoing store openings could lessen the effect of any decline in same store sales for the ASX share in FY23 and FY24.

Adairs Ltd (ASX: ADH)

Adairs sells furniture and homewares through its three businesses of Adairs, Mocka and Focus on Furniture. While Mocka is an online-only brand, there are plans to sell its furniture in stores, which would be a useful synergy between its business.

The Adairs share price has fallen over 30% from 1 February 2023, which has boosted the forward dividend yield.

Commsec estimates currently indicate that the FY23 annual dividend per share could be 16.5 cents, with dividend increases expected in FY24 and FY25. The FY23 payout translates into a grossed-up dividend yield of 11.7%. That’s a lot of passive income, even at a lower level.

While there may be uncertainty about household demand, I think Adairs’ plans to upsize its stores and grow the store network of Focus on Furniture will help improve the profitability of the business. So, I believe that Adairs’ earnings can hold up fairly well in this period.

In FY23, the ASX share’s EPS is expected to be 26.8 cents, putting the Adairs share price at under 8 times FY23’s estimated earnings as well.

The post Dividend yields over 10%! Cheap ASX shares I’d buy for passive income appeared first on The Motley Fool Australia.

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More reading

• I hope to retire rich. That’s why I’m buying cheap ASX dividend shares right now
• Here’s one hot, one lukewarm and one cold ASX share: fundie
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• Why Adairs, Liontown, Qantas, and Synlait shares are dropping today
• Is it a trap? 3 ASX shares with ultra-high dividend yields

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool Australia has recommended Dusk Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Did you buy Woolworths Group Ltd (ASX: WOW) shares in March 2018 and hold onto them? If so, pat yourself on the back – your investment has outperformed the market so far.

The Woolworths share price has gained a whopping 66% over the last five years – rising from around $22.48 to trade at $37.37 at Thursday’s close.

That means a $10,000 investment back then would have bought 444 Woolworths shares. That parcel would be worth $16,592 today.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has lifted around 20%.

And that’s all before we consider the dividends on offer from the supermarket operator in that time.

How much have Woolworths shares paid in dividends in 5 years?

Take a look at all the dividends paid to those holding Woolworths shares since March 2018:

Westpac dividends’ pay date	Type	Dividend amount
September 2022	Final	53 cents
April 2022	Interim	39 cents
October 2021	Final	55 cents
April 2021	Interim	53 cents
October 2020	Final	48 cents
April 2020	Interim	46 cents
September 2019	Final	57 cents
April 2019	Interim	45 cents
October 2018	Final	50 cents
October 2018	Special	10 cents
April 2018	Interim	43 cents
Total:		$4.99

Those invested in Woolworths shares over the last five years have likely realised $4.99 of dividends per stock owned in that time.

That means our figurative $10,000 parcel has probably yielded around $2,215.56 of passive income, supporting a notable total return on investment (ROI) of 88%.

And, of course, Woolworths shareholders received one Endeavour Group Ltd (ASX: EDV) stock for each Woolies security held when the supermarket giant divested the business in 2021.

Not to mention, had a shareholder reinvested their dividends, they likely would have realised some impressive compound gains.

Considering all the offerings paid by Woolworths over the last 12 months, the share boasts a 2.46% dividend yield right now. The company will pay out its next dividend – worth 46 cents per share – in April.

The post Did you buy $10,000 of Woolworths shares in 2018? If so, here’s how much passive income you’ve banked appeared first on The Motley Fool Australia.

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More reading

• Give yourself a passive income boost with these growing ASX 200 dividend shares: analysts
• ‘Increased confidence’: Alphinity reveals 2 ASX 200 shares it just bought
• Experts name 2 high quality ASX 200 shares to buy for your retirement portfolio
• Where I would go hunting for defensive ASX 200 shares with upside
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking for big potential returns, then look no further. Goldman Sachs has recently slapped buy ratings on the two ASX 200 shares listed below with price targets materially higher than current levels.

Here’s what the broker is saying about them:

Allkem Ltd (ASX: AKE)

The first ASX 200 share that Goldman Sachs has named as a buy is Allkem. It is one of the world’s largest lithium miners and the result of the merger between Galaxy Resources and Orocobre in 2021.

From its projects across Argentina, Australia, and North America, the company is aiming to grow its production in a way that allows it to maintain a 10% share of global lithium supply over the long term.

It is this production growth, as well as its downstream optionality, that makes Goldman a fan of Allkem even when it is bearish on lithium prices. It commented:

Allkem has one of the best production outlooks in our lithium coverage, with broad-based growth optionality, second only to Mineral Resources on an LCE basis when including downstream hydroxide production on an equity basis. This drives our forecast for the company’s equity LCE production growth of >4x by FY27E, supporting earnings rebounding to near current record levels despite the declining lithium price environment.

Goldman currently has a buy rating and $15.40 price target on its shares. Based on the current Allkem share price of $9.99, this implies potential upside of 54% for investors.

Life360 Inc (ASX: 360)

Another ASX 200 share that Goldman Sachs is bullish on is Life360. It is a growing location technology company that has close to 50 million global active users of its eponymous Life360 mobile app.

Its shares have been hammered over the last 12-18 months due to the market’s aversion to loss-making tech stocks. However, with the company on the verge of becoming profitable, Goldman appears to see now as a great time to pounce on its shares.

Particularly given its impressive performance and its strong growth potential, which it feels is underappreciated by the market. The broker commented:

Life360 is executing well on its pricing strategy as the company moves to a profitable growth model, and we believe management’s targets regarding underlying/statutory EBITDA margin expansion should help the market quantify the operating leverage we believe Life360 can generate in coming years. The company is well capitalised, will be cash flow positive from 2Q23, and stands to generate significant earnings growth in coming years; all of which look underappreciated by the market as implied by the current share price at ~2x NTM EV/sales.

Goldman has a buy rating and $7.85 price target on its shares. Based on the current Life360 share price of $5.05, this suggests potential upside of 55% over the next 12 months.

The post Buy these ASX 200 shares for 50%+ returns: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• Investing in ASX 200 lithium shares? You’ll want to read this
• Why are ASX lithium shares sinking today?
• What was with ASX lithium shares today?
• Allkem share price can jump 45% even if lithium prices fall: Goldman Sachs
• These ASX lithium shares are a buy despite explosive supply forecast: UBS

Motley Fool contributor James Mickleboro has positions in Allkem and Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you would like to make some investments but aren’t sure which ASX shares to buy, you could look at exchange traded funds (ETFs) instead.

But with so many to choose from, which ETFs could be buys right now?

Two that could be top options are listed below. Here’s what you need to know about them:

Vanguard All-World ex-U.S. Shares Index ETF (ASX: VEU)

The first ETF for investors to look at is the Vanguard All-World ex-U.S. Shares Index ETF.

The VEU ETF brings the world to your portfolio by given you access to approximately 3,500 companies listed in developed and emerging markets across the globe (excluding the United States).

Vanguard highlights that this can expand a portfolio to include many sectors not well represented in Australia. It also complements a portfolio with overweight exposure to local investments. That’s because the largest country allocations are Japan, China, United Kingdom, France, and Canada, with Australia accounting for only 5% of the exposure.

Among its holdings you’ll find a diverse group of shares including HSBC Holdings, Samsung, LVMH Moet Hennessy Louis Vuitton, Sony, Taiwan Semiconductor, Tencent, Toyota, Astra Zeneca, and Roche Holdings.

Vanguard U.S. Total Market Shares Index ETF (ASX: VTS)

Another ETF for investors to consider is the Vanguard Australian US Total Market Shares Index ETF.

This could be a good option if you would prefer to gain exposure to the United States rather than the globe. That’s because this low-cost and diversified ETF provides investors with access to some of the largest companies listed in the United States.

Vanguard highlights that it allows investors to participate in the long-term growth potential of US listed companies. The fund manager sees it as a top option for buy and hold investors seeking long-term capital growth, some income, and international diversification.

Among the companies included in the ETF are the likes of Amazon, Apple, Boeing, CostCo, JP Morgan, Starbucks, and Walmart.

The post 2 fantastic ETFs for ASX investors to buy this month appeared first on The Motley Fool Australia.

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More reading

• 2 excellent ETFs for ASX investors to buy now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you are searching for ASX dividend shares to buy, then you may want to check out the two high yield option listed below.

Here’s why analysts are bullish on them:

Charter Hall Long WALE REIT (ASX: CLW)

The first high yield ASX dividend share that has been named as a buy is Charter Hall Long Wale REIT.

It is a property company focused on high quality real estate assets that are leased to corporate and government tenants on long term leases.

The team at Citi is positive on Charter Hall Long Wale REIT. Its analysts highlight its “low risk income stream with c. 12 year WALE and 99.9% occupancy.”

The broker expects this to underpin dividends per share of 28 cents in FY 2023 and 29 cents in FY 2024. Based on the current Charter Hall Long Wale REIT share price of $4.23, this will mean yields of 6.6% and 6.85%, respectively.

Citi currently has a buy rating and $5.00 price target on its shares.

Westpac Banking Corp (ASX: WBC)

Another ASX dividend share that analysts have named as a buy is Westpac.

Goldman Sachs is very bullish on the banking giant and believes its exposure to rising interest rates and the bank’s major cost cutting plans will support strong earnings and dividend growth in the coming years.

The broker is forecasting fully franked dividends per share of 147 cents in FY 2023 and 156 cents in FY 2024. Based on the current Westpac share price of $21.33, this will mean yields of 6.9% and 7.3%, respectively.

Goldman also sees plenty of upside potential for its shares and currently has a conviction buy rating and $27.74 price target on them.

The post Want passive income? Analysts say you can get 6%+ yields with these ASX dividend shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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S&P/ASX 200 Index (ASX: XJO) banks closed the day in the red on Thursday.

The big five bank stocks, which includes Macquarie Group Ltd (ASX: MQG), came under pressure following the latest interest rate hike from the US Federal Reserve.

Here’s how these ASX 200 banks performed on Thursday, a day that saw the benchmark index slide 0.67%:

• Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares closed down 0.39%
• National Australia Bank Ltd (ASX: NAB) shares closed 1.5% lower
• The Westpac Banking Corp (ASX: WBC) share price closed down 0.47%
• Commonwealth Bank of Australia (ASX: CBA) shares closed down 0.11%
• Macquarie shares closed down 1.78%

ASX 200 banks may also be facing some pressure after US Treasury Secretary Janet Yellen said the US government isn’t discussing providing deposit insurance to every bank, potentially leaving smaller US banks in the lurch.

Yellen added that bank runs “may more readily happen now”.

ASX 200 banks too big to fail?

As for ASX 200 banks, the nation’s biggest banks enjoy an implicit guarantee from the Australian government (meaning us taxpayers) that they’ll be bailed out if that need should arise.

This is separate from the Financial Claims Scheme, which guarantees deposits up to $250,000 per account holder at all authorised deposit-taking institutions (ADIs).

As The Australian Financial Review (AFR) reports, the bank levy on the big four banks and Macquarie raised almost $1.6 billion for the government in 2022.

A 0.06% tax is levied on the banks’ funding sources. It came into being in 2017 as a way to have the ASX 200 banks chip in for the privilege of any bailout. It’s an entitlement that comes with being ‘too big to fail’.

Now, with the banking crisis gripping the United States and Europe, Australia’s smaller banks think that levy should be reviewed.

Time to raises the levy?

Representatives of the smaller banks think the ASX 200 banks should possibly pay a higher levy. This comes as their own funding costs are on the rise in the current environment, making fair competition with their larger rivals more difficult.

According to CEO of the Customer Owned Banking Association Mike Lawrence (quoted by the AFR):

There are arguments to review [the levy] in the current environment. There is evidence to show they are not paying the full amount of the benefit they get from it. In the current environment, there is an argument to say it is too low.

Pointing to the fallout in bond markets from the UBS takeover of Credit Suisse, Lawrence added:

Funding costs will go up as a result of this, and potentially the differential between large bank funding costs and smaller lenders will widen.

Funding costs for smaller lenders relative to bigger ones are disproportionately impacted because having the implicit guarantee potentially puts them in a better position to raise funds at a lower cost. That should be reflected in the fee that they pay to the government.

Whether or not the ASX 200 banks will be hit with a higher levy remains to be seen.

The post Should ASX 200 banks pay more for this implicit government backstop? appeared first on The Motley Fool Australia.

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More reading

• How to make $500 of monthly income from CBA shares
• Buy these ASX 200 dividend shares for a second income: analysts
• ASX big four bank shares close the day ahead as financial fears linger
• Could owning NAB shares soon include a slice of Credit Suisse?
• Why New Hope, Pilbara Minerals, Westpac, and Zip shares are pushing higher

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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