2023-08-08 20:32:42
The upswing in Italian bank stocks, which has primarily boosted the stock market favorite Unicredit, came to a bitter end on Tuesday. The financial houses lost value in rows, Unicredit almost 7 percent by midday, Intesa Sanpaolo a good 8 percent and Bper more than 9 percent. Because the Italian government surprisingly announced a 40 percent excess profit tax on the banks of their country on Monday evening. In doing so, she wanted to correct “the mistakes of the European Central Bank”, as Deputy Prime Minister and Foreign Minister of Italy, Antonio Tajani, told the Italian daily “Corriere della Sera”.
Several Italian government politicians have been protesting against the ECB’s rate hikes for some time. It threatens to plunge the Italian economy into recession and puts an undue burden on citizens. According to the Banca d’Italia, 37 percent of loans to households are at variable rates, which is now increasingly weighing on borrowers. Added to this is the higher interest burden for new loans. In Italy, on the other hand, fighting inflation is traditionally less important than in Germany. The ECB’s critics argued that the rise in prices was mainly due to the inflation of imported goods, which interest rate hikes would do little to counteract.
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The government of Prime Minister Giorgia Meloni now wants to use the profit tax to generate income in order to relieve mortgage owners and financially weak borrowers. The tax is to apply this year and will affect banks’ 40 percent of the difference in income between current lending rates and the still very low deposit rates. The government has repeatedly criticized the financial industry for only increasing lending rates and hardly any interest rates on deposits, despite the ECB’s rate hikes. Experts estimate that a tax could also be an incentive to increase interest on savings and thus reduce tax liability. However, details have not yet been determined.
Parliament, which is currently on vacation, must first enact a law. According to initial calculations, around three billion euros in tax revenue could come together. Bank of America analysts estimate the tax could siphon off 2% to 9% of Italy’s bank profits. Citibank had already speculated about 13 percent in April when the first rumors about the project arose.
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However, the discussion about the tax seemed to be over when Finance Minister Giancarlo Giorgetti rejected the project in June. Strikingly, he did not attend the press conference at which the tax was announced on Monday evening. This took over with Salvini the chairman of the party Lega, to which Giorgetti also belongs.
Last year, Italian banks generated more than 45 billion euros in interest income, around 7 billion euros more than in the previous year. This year, however, the effect is much larger: the Italian market leader Intesa Sanpaolo alone expects net interest income of 13.5 billion euros for 2023. According to a trade union, the five leading institutes in Italy – in addition to Intesa, Unicredit and Bper also Banco Bpm and Monte dei Paschi – achieved a net profit of a good 10 billion euros in the first half of the year – two thirds more than in the previous year.
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Spain, Hungary and the Czech Republic have also recently announced excess profit taxes on their banks. Spain wants to take in 6 billion euros over two years in order to alleviate the energy burden of households; the Spanish banks have sued against this. The ECB has also criticized the measure because it hinders monetary policy, could slow down lending and delay the build-up of equity capital. The Italian banking association ABI declined to comment; he hopes to limit the burden in discreet talks with the government.
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