Financial institutions are suffering a devastating financial crisis as they are facing the fallout from a $US6 billion US tax cut announced on Monday, but one of the banks that was hit the hardest is Melbourne’s MBL Financial.
The MBL financial unit is Australia’s largest and has been the biggest recipient of the $US7.4 billion in tax cuts, according to the Reserve Bank.
MBL has been hit with a $1.5 billion hit in capital costs and has lost more than $US3 billion in total earnings, according the Australian Financial Review.
“MBL’s core business is selling money-market funds and that business is going through a severe crisis,” chief executive Andrew Smith said.
“[Its] going to be a very difficult and very hard time for the group.”
It’s really tough times.
It’s been a pretty hard year,” he said.MBL said its core business was selling money market funds and was “going through a very severe crisis” and was losing more than US$3 billion. “
The financial system is in a state of disarray.
It’s been a pretty hard year,” he said.MBL said its core business was selling money market funds and was “going through a very severe crisis” and was losing more than US$3 billion.
Its core business will suffer the most from the $7.2 billion tax cut, according Mr Smith.
In the past, MBL had been one of Melbourne’s biggest earners and had been a major beneficiary of the tax cuts.
But the bank is now one of just five Australian banks that have seen its net income fall by almost $US5 billion in the past two years, as a result of the economic slowdown and falling commodity prices.
When asked how MBL is doing financially, Mr Smith said it had been in “a challenging and challenging environment” since the tax cut was announced.
He said MBS had been hit by falling commodity and fixed income prices.
“We have been experiencing a period of very low returns, very weak returns, but we are in a tough environment and that is something we have to deal with and we have a long way to go to recover,” he told ABC Radio Melbourne.
Mr Smith also said MBIA was also experiencing a “very challenging period”.
“It has been an extremely challenging year for MBIAs net income,” he added.”MBIAs core business has suffered, it has suffered from falling commodity, it’s suffered from very low yields and very high interest rates, and that has affected its profitability.”
The Australian Financial Services Association (AFSA) said it has been a “shocker” to see MBL struggle to make its annual profit forecasts.
It said the bank had a “tough situation”.
“The AFSA is disappointed that MBL has had a tough year,” AFSAC managing director David McAlpine said.
“Our concern is that the MBLs performance is at risk because of the negative impact of the financial and regulatory environment and the severe blow to its core businesses.
For example, it is extremely challenging for MBL to maintain profitability as a standalone business and is dependent on a significant amount of debt.
This is not a sustainable business for MBS and MBL cannot continue to be an independent financial institution.”
In a statement, MBIAS said the cuts were not sustainable and that it was taking “all appropriate steps” to improve the financial health of its businesses.
Topics:business-economics-and-finance,industry,bankers,financial-industry-and.markets,government-and-(business-groups-and/or-central-government),financial-markets,financials,banker-and%E2%80%99s-department,melbourne-3000,vic source Four FourTwo title MBIAA: MBL hit hard but we’re still here article The bank’s CEO, Andrew Smith, said the MBIAH would work with MBL and MBS to come to a resolution on its financial situation.
However, the Australian Taxation Office is now conducting a review of the cuts.
“The Tax Office is currently assessing whether the tax relief provided by the tax reforms may be a positive or negative impact on Australian financial outcomes,” a spokesman for the Australian Capital Territory’s Tax Office said.
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