Italian banks rebound as government backtracks on windfall tax
Italian banks on Wednesday bounced back from the previous day's losses after the government capped a surprise 40-percent windfall tax at 0.1 percent of assets.
The sector had shed around $10 billion on Tuesday following the announcement of a plan by Giorgia Meloni’s government to take 40 percent of "surplus profits" before the finance ministry stepped in to "preserve the stability of banking institutions" and calm a market storm.
Shares in major banks had plunged on Tuesday after deputy Prime Minister Matteo Salvini told reporters the tax would be levied on profits the banks had netted in the wake of the European Central Bank's recent interest rate hikes.
Following the initial announcement, Intesa Sanpaolo lost 8.6 percent and Unicredit 5.9 percent of their share price while Monte dei Paschi di Siena, Bper Banca and Banco Bpm gave up 10.8, 10.9 and 9 percent respectively, as the sector shed $9.5 billion in market cap value according to an estimate by Radiocor financial news agency.
Wednesday saw the sector bounce back strongly on the Milan stock exchange, with Intesa Sanpaolo adding 2.3 percent, rival UniCredit 4.4 percent and Banco BPM 5.4 at the close.
Meloni's ministers had agreed the shock initial move at a cabinet meeting late Monday, vowing to invest the funds raised into helping households and businesses struggling with the cost of borrowing after the European Central Bank (ECB) rate rises boosted banks' profits but hiked costs for borrowers.
READ ALSO: What you need to know about opening a bank account in Italy
Foreign Minister Antonio Tajani told Tuesday's Corriere della Sera newspaper the levy would "only last one year" while adding Rome's view was the ECB was "mistaken in raising interest rates, and this is the inevitable consequence".
Sector profits have been on the rise, with Intesa Sanpaolo seeing its net profit rise by 80 percent to 4.2 billion euros in the first half of the year, while UniCredit posted a half-yearly net profit of 4.4 billion euros.
Spain's left-wing government introduced a similar tax on banks scheduled for 2023 and 2024, drawing criticism from the ECB.
Prime Minister Meloni's government is out to raise funds for the draft budget for 2024, after a surprise 0.3 percent decline in gross domestic product (GDP) in the second quarter of 2023.
In unveiling the measure, Meloni said in a Facebook post that "we decided to intervene with the only instrument at the government's disposal – fiscal policy."
READ ALSO: Which documents do I need to open an Italian bank account?
The Italian employers' association Unimpresa said banks were paying out an average 0.32 percent on 669 billion euros of deposits while charging 4.25 percent on 1.3 trillion of household lending.
With the latest limiting of the windfall tax the impact is due to cost banks around 2.5 billion euros – around half the initial total forecast, analysts with Jefferies calculate.
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The sector had shed around $10 billion on Tuesday following the announcement of a plan by Giorgia Meloni’s government to take 40 percent of "surplus profits" before the finance ministry stepped in to "preserve the stability of banking institutions" and calm a market storm.
Shares in major banks had plunged on Tuesday after deputy Prime Minister Matteo Salvini told reporters the tax would be levied on profits the banks had netted in the wake of the European Central Bank's recent interest rate hikes.
Following the initial announcement, Intesa Sanpaolo lost 8.6 percent and Unicredit 5.9 percent of their share price while Monte dei Paschi di Siena, Bper Banca and Banco Bpm gave up 10.8, 10.9 and 9 percent respectively, as the sector shed $9.5 billion in market cap value according to an estimate by Radiocor financial news agency.
Wednesday saw the sector bounce back strongly on the Milan stock exchange, with Intesa Sanpaolo adding 2.3 percent, rival UniCredit 4.4 percent and Banco BPM 5.4 at the close.
Meloni's ministers had agreed the shock initial move at a cabinet meeting late Monday, vowing to invest the funds raised into helping households and businesses struggling with the cost of borrowing after the European Central Bank (ECB) rate rises boosted banks' profits but hiked costs for borrowers.
READ ALSO: What you need to know about opening a bank account in Italy
Foreign Minister Antonio Tajani told Tuesday's Corriere della Sera newspaper the levy would "only last one year" while adding Rome's view was the ECB was "mistaken in raising interest rates, and this is the inevitable consequence".
Sector profits have been on the rise, with Intesa Sanpaolo seeing its net profit rise by 80 percent to 4.2 billion euros in the first half of the year, while UniCredit posted a half-yearly net profit of 4.4 billion euros.
Spain's left-wing government introduced a similar tax on banks scheduled for 2023 and 2024, drawing criticism from the ECB.
Prime Minister Meloni's government is out to raise funds for the draft budget for 2024, after a surprise 0.3 percent decline in gross domestic product (GDP) in the second quarter of 2023.
In unveiling the measure, Meloni said in a Facebook post that "we decided to intervene with the only instrument at the government's disposal – fiscal policy."
READ ALSO: Which documents do I need to open an Italian bank account?
The Italian employers' association Unimpresa said banks were paying out an average 0.32 percent on 669 billion euros of deposits while charging 4.25 percent on 1.3 trillion of household lending.
With the latest limiting of the windfall tax the impact is due to cost banks around 2.5 billion euros – around half the initial total forecast, analysts with Jefferies calculate.
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