Banks boost R&D spend despite tax incentive changes

Australia’s major banks stepped up their R&D expenditure in 2012, despite some looking to global technology partners to do the heavy lifting on innovation.

The European Commission’s latest scorecard on R&D spending by 1500 companies includes three of the top four Australian banks, with ANZ ranked highest at 203, with a spend of $588.1 million. The bank’s investment in R&D grew 14.1 percent during the year.

NAB doubled its expenditure on R&D during the year to $478.6 million, however a spokesman for the bank said its strategy was to partner with technology firms, such as Oracle and IBM, that spent more on R&D than it ever could.

“Our plan is to have relationships with businesses where R&D is more crucial to their own business model, particularly in the technology sense,” said NAB spokesman Dan Holland.

Holland said by partnering with global technology firms that had “skin in the game”, NAB could ensure it benefited from continued R&D investment from its partners.

Oracle, which is working with NAB to build its new core banking system, spent $4.3 billion on R&D last year, according to the EC scorecard, outspending Apple’s $2.4 billion.

However both were eclipsed by Google, which spent more than $5 billion on R&D last year.

And despite Europe’s economic woes hitting the balance sheets of Australia’s global banking peers much harder, banks including HSBC, the Royal Bank of Scotland and Santander still outspent our banks.

Spain’s Banco Santander, which is reportedly considering a bid for NAB’s UK banking units, topped the world’s banks for R&D spend with $1.79 billion of investment.

Despite a sales growth decline of 27.6 percent, RBS boosted its spending on R&D by 41.5 percent, investing $1.58 billion.

HSBC also saw declining sales growth, despite an R&D investment of $1.1 billion.

Australia’s banks benefit from the Federal Government’s R&D tax incentive scheme which delivers up to a 40 percent tax offset for R&D investment.

However in recent years core technology expenditure has been excluded from the scheme.

The Australian Bankers’ Association unsuccessfully argued against the government excluding core systems upgrades from the scheme, claiming such a move would drive more technology innovation, skills and jobs overseas.