Italy Slaps 40% Windfall Tax On Profitable Banks

Italy dealt a surprise blow to its banks and sent shockwaves across the sector in Europe by setting a one-off 40% tax on profits reaped from higher interest rates after reprimanding lenders for failing to reward depositors, CNN reported.

Photo Insert: Italy’s banking share index plunged 7.7% on Tuesday, with Intesa Sanpaolo down 8.4% and rival UniCredit down 7%.

Sharply higher official interest rates have yielded record profits for banks, as the cost of loans soared while lenders held off paying more on deposits. European bank shares tumbled on Tuesday.

A gauge of eurozone banks fell 4.5%, and was set for its biggest daily drop since the turmoil in the banking sector in March when Credit Suisse collapsed, Reuters also reported.

Italian Prime Minister Giorgia Meloni’s government had floated the idea earlier in the year but appeared to have cooled on the plan. Bank of America estimated that the tax would slash between 2% and 9% of bank earnings.

Bumper first-half results from banks brought the issue back into focus and forced government to act on the eve of the summer political shutdown.

Big Italian lenders reported stronger-than-expected results for the first six months and upgraded their profit outlook due to higher rates.

Lenders in Italy have passed on to depositors on average 12% of the rise in rates, versus 22% in the euro area, Jefferies calculated.

“One has only to look at banks’ first-half profits … to realize that we are not talking about a few millions, but … of billions,” Deputy Prime Minister Matteo Salvini told journalists in Rome late on Monday, Reuters said.

Italy’s banking share index plunged 7.7% on Tuesday, with Intesa Sanpaolo down 8.4% and rival UniCredit down 7%

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