Italy has announced a one-off 40% windfall tax on local banks that have been accused of reaping billions in extra profit from rising interest rates.

The Italian government, which approved the surprise tax in a cabinet meeting on Monday night, said it planned to use the proceeds to support mortgage holders and cut taxes, at a time when rising rates have put extra pressure on households.

The decision, which analysts said could force banks to collectively give as much as €4.9bn (£4.2bn) to the state, sent bank shares plunging. Shares in Italy’s largest bank, Intesa Sanpaolo, fell 8.67% to close at €2.338 on Tuesday afternoon, while Unicredit closed 5.9% lower at €21.28.

It follows similar moves by Spain last year, and comes only weeks after Intesa Sanpaolo raised its profit forecasts for the year, reviving concerns over potential profiteering by high-street lenders.

Italy’s deputy prime minister, Matteo Salvini, told a news conference in Rome: “One only has to look at the banks’ first-half 2023 profits, also the result of the European Central Bank’s rate hikes, to realise that we are not talking about a few millions, but we are talking, one can assume, of billions .

“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 added, saying there was a large gap between the rates applied to loans and those to deposits.

Bank profits have soared in recent quarters because rising interest rates have allowed them to increase the amount they charge borrowers for loans and mortgages at a faster pace than they improve returns to savers. Lenders have pocketed the difference, known as the net interest margin and a key measure of their profitability.

The Italian government intends to tax 40% of this net interest margin, probably for 2023 as a whole. The payment is due by mid-2024.

Marco Nicolai, an equity analyst at Jefferies, said the decision to tax the net interest margin “came out of the blue”, noting that Italy’s minister of economy and finance, Giancarlo Giorgetti, “publicly poured water on this idea in the recent past”.

Jefferies estimated that Italy’s 10 largest publicly listed banks could end up paying €4.9bn as a result of the windfall tax, although the total figure was unclear. Nicolai said: “As of now, we haven’t seen an official version of the law, which adds further uncertainty over the potential impacts of this decision.”

The UK, which already has two banking sector taxes in place, is not expected to make similar moves. Instead, authorities have been taking aim at banks offering low savings rates, with the Financial Conduct Authority threatening to take “robust action” against laggards by the end of the year.

Rishi Sunak’s government has conversely tried to ease the tax burden on banks, by reducing the bank surcharge to compensate for a rise in corporation tax earlier this year.

There has also been pushback from the banking sector, which raised concerns about the potential competitive disadvantage. The industry body UK Finance said banks based in London already paid a “significantly higher rate of tax than those in other financial centres like Dublin and New York”.

A Labour source said the party did not intend to follow in Italy’s footsteps if it entered government.

A Treasury spokesperson said: “We already have two specific taxes for the banking sector – the bank levy and the bank corporation tax surcharge – and the entire UK banking sector generated around £39bn in tax last year which is almost enough to fund the entire police and justice system.

“The chancellor has been clear, however, that banks must pass on the interest rate increases to savers so they can benefit. The new consumer duty – which came into force last week – gives regulators the tools they need to take action where this isn’t happening.”