Italy’s banks bounce back after government U-turn on its windfall tax
Italy’s banking sector has rebounded after the country’s government made a U-turn on its windfall tax on windfall gains.
Its shares plunged on Tuesday when they were surprised by a one-time 40 percent tax on bank profits imposed in response to a surge in profits caused by higher interest rates.
But after the market collapsed, the government in Rome, led by Giorgia Meloni (pictured), reversed course by announcing that banks would pay no more than 0.1 percent of their assets.
That sparked a revival in bank shares, with the country’s largest lender, Intesa Sanpaolo, rising 2.3 percent, while Unicredit jumped 4.4 percent.
U-turn: The government in Rome, led by Giorgia Meloni (pictured), reversed course by announcing that banks would pay no more than 0.1 percent of their assets
Others also recouped some of their weekly losses, with Banca Monte dei Paschi di Siena rising 2.5 percent and Banca Mediolanum gaining 2.7 percent.
It also helped boost the broader market with the FTSE MIB, which tracks the 40 largest shares on the Italian stock exchange, up 1.3 percent.
A similar tax was introduced in Spain last year, but one analyst said the market collapse meant it was unlikely to be repeated elsewhere.
“The most damaging impact of the surprise tax on windfall gains will be the risk premium that investors will demand to compensate them for the risk of future intervention,” said Morningstar’s Johann Scholtz.
He added: “After a similar tax in Spain and the ban on dividend payments during the pandemic, investors will be even more concerned about the risk of intervention by governments and regulators.”