Irish domestic lenders seen paying slightly lower bank levy

DUBLIN (Reuters) - Ireland's domestically-owned banks are likely to pay slightly less towards the country's annual levy on the sector from next year, analysts said on Thursday, after the government announced changes to the way the charge is calculated. Ireland's finance ministry said a year ago it would extend the levy introduced in 2014 for five more years, telling lenders they still owed taxpayers after requiring the euro zone's most expensive state bailout. It said on Thursday it would continue raising 150 million euros ($164 million) a year from the levy, which is paid in proportion to the customer deposits held by banks in Ireland. But it added the base for calculating the levy would move to the end of 2015 for the next two years, and would be recalculated again at intervals in the years after that. The current base year for the levy is 2011, a time when domestic banks held a higher proportion of bank deposits. "The changes would appear to favour the domestic banks, who should see reductions in their contributions to the levy, over the foreign owned banks who have increased their Irish retail deposit books in recent years," said Diarmaid Sheridan, an analyst at Davy Stockbrokers. The foreign-owned banks include the Irish businesses of KBC Bank and Royal Bank of Scotland . Majority state-owned permanent tsb , the smallest of Ireland's three remaining domestically-owned lenders and last to return to profit, had called for a fundamental change to the calculation as its contribution accounts for a far larger chunk of its cost base than other lenders'. The finance ministry warned earlier this year that given the low underlying profitability at permanent tsb, any increase in the levy would risk the bank's restructuring plan and could in a worst case scenario render it unviable. Davy's Sheridan estimated permanent tsb's share of the levy would fall to 23 million euros from 27 million a year, which was more than the 26 million euros of profit it made for 2015. "It's an improvement but it's still a big number for them and is still going to be a significant part of their cost base," Sheridan said. ($1 = 0.9145 euros) (Reporting by Padraic Halpin; Editing by Mark Potter)