Bank of Queensland, Bendigo and Adelaide Bank and Westpac all feature on a list of ASX-listed companies with high franking account balances.
Macquarie Securities has issued a report, Franking Matters, which draws franking account balance information from 2020/21 annual reports and calculates those balances as a proportion of the company’s market capitalisation.
Among companies in the ASX 100, BOQ is in the top five, with a franking account balance equivalent to around 9 per cent of its market cap.
Bendigo and Adelaide Bank is not far behind and Westpac has a balance equivalent to 5 per cent of its market cap.
Mortgage broker aggregator AFG also makes the list, with a balance to market cap ratio of around 14 per cent, along with Credit Corp at around 10 per cent and Genworth Mortgage Insurance Australia at around 6 per cent.
Franking account balances accrue on companies’ balance sheets as they pay tax but they can only be utilised when they are distributed to shareholders and claimed through the dividend imputation system.
Companies that build large balances may come under pressure from shareholders to distribute franking credits via special dividends or buybacks. Anticipation of such actions may be a driver of share price growth.
Macquarie did not comment specifically on whether BOQ or Bendigo and Adelaide are likely to utilise their franking credit balances in the short term but it said Westpac was unlikely to do so, given that it has recently completed an off-market share buyback and looks to have no excess capital available.
The company with the biggest franking credit balance as a proportion of market cap is Southern Cross Media, at close to 50 per cent.