Italy has unexpectedly approved a 40% levy on lenders’ “excess” profits this year
The Italian government’s announcement of a one-off windfall tax on bank profits saw the country’s financial stocks tumble on Tuesday, wiping out some €10 billion ($11 billion) from their combined market value.
Shares in Italy’s biggest bank, Intesa Sanpaolo, and Finecobank, which focuses on online brokerage, had both plunged 8% by the afternoon, while BPER Banca was 10% lower. Verona-based Banco BPM saw shares drop 9% as UniCredit sank 7%. Italy’s FTSE MIB fell 2.6%, while the Stoxx Europe 600 index declined 0.7%.
The drastic step taken by the Italian cabinet sent ripples beyond the country, with Germany’s Commerzbank dropping around 3.2% and Deutsche Bank trading 2% lower.
Earlier, Italian Deputy Prime Minister Matteo Salvini told journalists that the 40% levy on extra bank profits derived from higher interest rates will be used by the government to reduce taxes and provide financial aid to the holders of first mortgages.
“One only has to look at the banks’ first-half 2023 profits, also the result of the European Central Bank’s rate hikes, to realize that we are not talking about a few million, but we are talking one can assume of billions,” he said.
“If the cost of money burden for households and businesses has increased and doubled, it has not equally doubled what is given to current account holders.”
The levy will apply to “excess” net interest income in both 2022 and 2023 resulting from higher interest rates, and will be applied on net interest income exceeding 3% year-on-year growth in 2022 from 2021 levels, and exceeding 6% year-on-year growth in 2023 versus 2022.
The tax could bring over €2 billion ($2.2 billion) into state coffers, according to local media outlet ANSA.
Banks are required to pay the tax within six months after the end of the financial year.