{"id":10180,"date":"2023-08-08T15:56:38","date_gmt":"2023-08-08T15:56:38","guid":{"rendered":"https:\/\/isafespend.com\/investing\/italy-shocks-banks-with-40-windfall-tax-for-2023\/"},"modified":"2023-08-08T15:56:38","modified_gmt":"2023-08-08T15:56:38","slug":"italy-shocks-banks-with-40-windfall-tax-for-2023","status":"publish","type":"post","link":"https:\/\/isafespend.com\/?p=10180","title":{"rendered":"Italy shocks banks with 40% windfall tax\u00a0for 2023"},"content":{"rendered":"
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\n<\/u>2\/2<\/span><\/p>\n

\u00a9 Reuters. FILE PHOTO: Intesa Sanpaolo bank logo and decreasing stock graph are seen in this illustration taken March 12, 2023. REUTERS\/Dado Ruvic\/Illustration<\/span>
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By Angelo Amante, Valentina Za and Giuseppe Fonte<\/p>\n

ROME (Reuters) -Italy dealt a surprise blow to its banks and sent shockwaves across the sector in Europe by setting a one-off 40% tax on profits reaped from higher interest rates, after reprimanding lenders for failing to reward deposits. <\/p>\n

Sharply higher official interest rates have yielded record profits for banks, as the cost of loans soared while lenders held off paying more on deposits.<\/p>\n

Countries such as Spain and Hungary have already imposed windfall taxes on the sector and others may now follow suit.<\/p>\n

Italian Prime Minister Giorgia Meloni’s government had floated the idea earlier in the year, but appeared to have cooled on the plan.<\/p>\n

A senior banking executive told Reuters that lenders had been ready for “the chopping block, but then the axe didn’t come down”.<\/p>\n

Since then, however, bumper first-half results from banks brought the issue back into focus and prompted the government to act on the eve of the summer political shutdown.<\/p>\n

One government source said the move came as a surprise even to some ministers at Monday night’s cabinet meeting. A second source made clear the government intended “to punish banks’ unfair behaviour”.<\/p>\n

Lenders in Italy have passed on to depositors on average 12% of the rise in rates, versus 22% in the euro area, Jefferies calculated.<\/p>\n

“One has only to look at banks’ first-half profits … to realise that we are not talking about a few millions, but … of billions,” Deputy Prime Minister Matteo Salvini told a news conference in Rome late on Monday.<\/p>\n

“If (it is true that) the burden deriving from the cost of money has … doubled for households and businesses, what current account holders receive has certainly not doubled,” Salvini said.<\/p>\n

Italy’s banking share index had plunged 7.3% by 1515 GMT on Tuesday, with sector leader Intesa Sanpaolo (OTC:) down 8.6% and rival UniCredit down 5.8%. Italian banks dragged the European index down 3.7%, with a Moody’s (NYSE:) downgrade of some U.S. banks also weighing.<\/p>\n

Italian banks are up 50% over the past year, outperforming a 20% European sector rise.<\/p>\n

The government wants to use the proceeds to help those struggling with the cost of living, such as mortgage holders.<\/p>\n

WINDFALL FOR THE TREASURY <\/p>\n

Citi analysts calculated the tax could wipe up to 12% off Italian banks’ 2023 earnings. Bank of America (NYSE:) estimated proceeds of between 2-3 billion euros for the government. <\/p>\n

Sources said the Treasury expected to collect less than 3 billion euros ($3.3 billion) from the measure.<\/p>\n

That would be similar to the 2.8 billion euros raised by this year’s windfall tax on energy companies.<\/p>\n

Italy will apply the tax only in 2023, with banks paying the sums by June 30, 2024. The measure applies to the net interest margin (NIM), a measure of income deriving from the gap between lending and deposit rates.<\/p>\n

Italy will tax 40% of the NIM earned in 2022 or 2023 – depending on which sum is bigger – targeting the yearly increase above thresholds set at no less than 5% for 2022 and 10% for 2023. Under an early draft, the thresholds were 3% and 6%.<\/p>\n

Intesa at the end of last month said it expected to pocket more than 13.5 billion euros this year from its NIM alone.<\/p>\n

All main Italian lenders reported much stronger than expected results for the first six months and upgraded their profit outlook thanks to higher rates.<\/p>\n

Unlike peers in some other European countries, Italian banks never charged for deposits when official rates fell below zero.<\/p>\n

Since rates rose, they have cut current account costs but have refused to reward cash held there saying that money is for day-by-day use and not an investment.<\/p>\n

($1 = 0.9112 euros)<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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