The share prices of Italian banks plummeted on Tuesday after the government announced on Monday that it was imposing a 40% windfall tax on lenders’ surplus profits.
Italy’s banks registered big profits in the first half of the year, with revenues boosted as a result of the European Central Bank’s interest-rate hikes. Among other things, this has caused payments on variable-rate mortgages to soar.
The tax will be paid in 2024 on the surplus profits of 2023.
“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. Salvini said the money raised by the windfall tax would be used to help households and businesses cope with higher interest rates.
Meloni’s government floated the idea earlier in the year. However, the cabinet appeared to have let the idea slide.
Italian banks taken by surprise
A senior banking executive told Reuters that lenders had been ready for “the chopping block, but then the axe didn’t come down”.
The slump in bank stocks saw the Milan bourse’s FTSE Mib index drop over 2%. That meant around €27.7 billion euros in capitalisation went up in smoke, including around 8.96 billion in bank stocks. The markets were taken by surprise by the government’s move.
Bper Banca shed 10.9%, MPS 10.8%, Finecobank 9.9%, Banco Bpm 9%, Intesa Sanpaolo 8.67%, and Unicredit 5.9%. Italian banks dragged the European index (.SX7E) down 3.7%.
Italian banks are up 50% over the past year, outperforming a 20% European sector rise.
Italy’s banks have not released a statement about the surprise windfall tax, amid reports of irritation within the industry.
According to initial estimates, it should generate between 2.5 and 2.8 billion euros.
Spain has already introduced a similar tax. It has generated €637 million so far. The aim is to increase the figure up to three billion euros over two years.
