Italy has watered down its new windfall tax on banks and set a cap on payouts, after the surprise levy spooked investors and sent shares in local lenders plunging.
The country’s rightwing government, led by the prime minister, Giorgia Meloni, appeared to backtrack on terms of the windfall tax less than 24 hours after it was announced. The government said on Tuesday night that lenders would pay no more than 0.1% of their assets – lower than original analyst estimates that expected the cap to hit 0.5%.
Analysts at Jefferies estimated that the cap would limit collective payouts from some of Italy’s largest listed banks, which account for about 50% of Italian deposits, to about €2.5bn (£2.2bn), compared with earlier estimates of up to €4.9bn.
The change comes a day after Meloni’s government announced the windfall tax, in an effort to target banks accused of reaping billions in extra profit from rising interest rates.
Bank profits have soared in recent quarters because rising interest rates across Europe have allowed lenders 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 – a key measure of their profitability.
The Italian government had said it intended to tax 40% of that net interest margin, probably for 2023 as a whole, with payment due by mid-2024.
It followed similar moves by Spain last year, and came only weeks after Italy’s largest bank, Intesa Sanpaolo, raised its annual profit forecasts, reviving concerns over potential profiteering by high-street lenders.
The surprise announcement sent bank shares plunging on Tuesday. However, the late night row-back and introduction of the cap helped banks recoup some of their losses on Wednesday.
“European markets are trading higher, with the FTSE MIB in Italy outperforming,” Victoria Scholar, the head of investment at Interactive Investor, said. “Italian banks are clawing back some of yesterday’s declines after the government watered down its windfall tax plans.”
Intesa Sanpaolo rose 3% as markets opened, having fallen more than 8% yesterday after the windfall tax was announced. Unicredit, which fell almost 6% on Tuesday, was up about 2.5%, helping Italy’s main stock index, the FTSE MIB, rise 1.2%.
