Italian bank stocks rebound after government caps new windfall profits tax
Aug. 9 (UPI) -- Italian bank stock prices were back up Wednesday after a new one-time 40% government bank profits tax that triggered a sell-off Tuesday was limited.
Stocks plummeted Tuesday after the government announced a 40% windfall tax tax on excess profits from higher interest rates in 2023. A government statement Tuesday night announced the tax on bank assets would be capped.
"The measure, for the purpose of safeguarding the stability of banking institutions, also provides for a maximum ceiling for the contribution which cannot exceed 0.1% of total assets," the statement said.
Bank shares for Italy's BPER Banca had dropped more than 9%, while Intesa Sanpaolo and Finecobank were down over 8%. Banco BPM fell 7% and Unicredit lost 6% before rebounding Wednesday.
The proposed tax measure hits what the government said are excess net interest income profits derived from higher interest rates.
Banor Capital Head of Equity Gianmarco Rania explained that the impact on bank stock prices happened when banks realized the windfall profit tax was going to collect far more than previously thought -- up to $5.48 billion (€5 billion) instead of $3.29 billion (€3 billion).
"With these changes, now we are talking about numbers which are less considerable, more under control, so we are talking about 10, 12% earnings impact for the small, mid banks on 2023 earnings, and something not really meaningful for the large banks in the area of 3-5%," Rania told CNBC.
A Citi analysis of the original government windfall bank profits tax found that up to 0.5% of total bank assets could be hit by the planned tax.
The government imposed the tax because rising interest rates boosted bank profits but was hurting people by raising the cost of living.
The one-time bank tax is expected to be used to cut taxes for consumers in Italy and to provide some mortgage relief.
Parliament must still pass the bank profits tax before it can be implemented.
