Italian Banks’ Shares Soar after Government Sets Cap on Windfall Tax

by Warren Seah

Shares in Italian banks are trading higher on Wednesday following the Italian government’s decision to set a cap on the proposed windfall tax imposed on lenders’ extra profits. This move aims to reassure the markets and promote stability within the banking system.

At 0808 GMT, Intesa Sanpaolo and UniCredit have seen their shares rise by 2.5% and 3.4% respectively. Similarly, smaller banks Banco BPM and BPER Banca have experienced increases of 2.9% and 2.7% respectively. Banca Monte dei Paschi di Siena is trading even higher, with a 3.4% increase.

To maintain stability within the banking system, the Ministry of Economy and Finance has stated that the proceeds from this tax will not exceed 0.1% of lenders’ total assets.

Equita Sim’s Andrea Lisi commented that “the news is positive for the banking sector as it more clearly defines the effects of the one-off taxation that, as currently formulated, is expected to have much smaller impacts.”

The shares of Italian banks started their recovery after a surprise announcement of this new tax caused a market selloff on Tuesday. The Italian government has agreed on a one-off 40% windfall tax on income generated from higher interest rates in either 2023 or 2022, depending on which is higher. However, the legislation to implement this levy still needs to be passed by Parliament.

Several other European countries, including Spain and Hungary, have already implemented similar taxes. Analysts predict that Italy’s decision could lead to other countries adopting bank taxes or levies in an effort to recoup profits.

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