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Mediolanum, Fineco, Credem and more. Those who toast for the changes to the tax on extra profits of banks

Mediolanum, Fineco, Credem and more. Those who toast for the changes to the tax on extra profits of banks

The upcoming changes to the tax on banks' extra profits, the reactions on the stock market, the impact of the corrections on the institutions, the analysts' report and the comments of some insiders

Yesterday, banking stocks celebrated the government's upcoming corrections on the rule on the so-called extra profits of credit institutions on the stock exchange.

Here are the new features that will be contained in the rule modified by the next council of ministers scheduled for September 28, the reactions on the stock market, the analysts' report and the comments of the experts.

WHAT HAPPENED TO THE BANK STOCKS ON THE STOCK EXCHANGE YESTERDAY

Yesterday, in a declining price list, with the banking Euro Stoxx down by 0.60%, Banco Bpm rose by 2%, Mps +0.87%, Fineco +0.73%, Mediobanca +0.45%, Banca Mediolanum +0.17%. This is, in a few numbers, the reactions of Piazza Affari to the changes that the government has in the works on the controversial tax on the so-called extra profits of the banks which in the first version caused the heads of the credit institutions to turn up their noses quite a bit (both for the method, given that the ABI was not involved nor the top management of Intesa Sanpaolo, who had not said they were prejudicially against it; and on the merits of the rule which was not well defined according to almost all insiders).

Furthermore, the negative effect of the tax on Mediolanum (led by Massimo Doris, in the photo) caused tremendous discontent in Forza Italia given the shareholding link of the Berlusconi group with the bank founded by Ennio Doris.

HERE'S THE NEWS ON EXTRA PROFIT TAX

Banks will be able to choose whether to pay the 'contribution' into the state coffers or divert it to strengthening their capital. It is one of the main innovations introduced by the draft amendment presented by the government to the asset decree, a few days after the arrival of the Nadef – expected in the Council of Ministers on 28 September – which will outline the path towards the 2024 budget.

Among the most significant changes – according to the reconstruction of Il Sole 24 Ore – stands out the alternative, for credit institutions, to the payment of the tax, with the possibility of "allocating, upon approval of the budget relating to the financial year prior to the one in progress on January 1, 2024, to the non-distributable reserve identified for this purpose, an amount equal to two and a half times the tax".

The draft also changes the maximum tax ceiling, which goes from 0.1% of total assets to "0.26% of the total amount of risk exposure on an individual basis", thus excluding government bonds .

Repubblica commented: “The main innovation of the amendments, added by the government to the Asset decree to be made law on 8 October, is the new calculation of the maximum ceiling, previously set at 0.1% of 2022 assets, while now it will be 0 .26% of 'risk-weighted assets'. The weighting is the share of capital allocated to the various activities, a higher percentage for uses such as credit and equity investments, while it is zero for government bonds. So the government doesn't hurt itself, given that the homeland banks have 400 billion in BTPs."

The beneficiaries of the tax revenue are then widened: the refinancing of the guarantee fund at Mediocredito Centrale for small and medium-sized businesses is added to the fund for the reduction of the tax burden for families and businesses.

Banks are also "prohibited – we read in the amendment – from transferring the burden of the levy onto the costs of services" provided to businesses and families. The Antitrust will monitor the new clause.

HERE IS THE IMPACT OF THE CHANGES ON MPS, ICCREA, CREDEM, FINECO AND MORE

The impact on listed banks of the tax on extra profits, after the changes contained in the amendment shared by the majority, would drop from 2.1 to 1.8 billion euros. This is what Equita calculates according to which the average impact on 2023 profits will fall from 9% to 8%.

“We believe – explains Equita, in an Ansa launch – that the majority of the institutions under our coverage will opt to pay the tax, in light of a manageable impact and in order to maintain greater flexibility on the remuneration policy. From this point of view, in a relative perspective, the main beneficiaries from the new definition of the tax are Banca Monte Paschi and Iccrea which, not expecting to distribute dividends this year in any case, will reasonably carry the profit generated to the reserve and will not be subject to extraordinary taxation (expected pre-amendment impact of 120 million and 166 million respectively).

In the note, Equita underlines how "the impact of the new definition of the tax is also lower for entities characterized by a more capital light business model and consequently with a lower Rwa density (Fineco and Banca Generali among the asset gatherers and Credem among the banks traditional). Equita recalls how the amendment of the tax on extra profits was finalized both to meet the requests of the ECB, which had highlighted the risk of weakening the capital position of the banks, and to cope with the pressure of some members of the majority who had requested the The exclusion of government bonds from the calculation of the tax is a less burdensome impact for smaller banks (the mutual banks, not distributing dividends, will not in fact be reasonably impacted by the tax). However, there is no tax deductibility".

DEUTSCHE BANK'S ESTIMATES AND THE MEDIOLANUM CASE

Deutsche Bank estimates a tax of 1.67 billion for the 12 listed banks, if they all intended to pay it instead of capitalizing profits; and it is 33% less than the initial estimates of the German research office.

Deutsche Bank specifies that the sum concerns only the listed universe (75% of the market), and another 3-400 million could come from smaller, unlisted banks which, even having less solid assets, would be more tempted to set aside profits , the newspaper Repubblica reports : “The ones most favored by the tax revision (they have enough government bonds but do not provide credit) are the savings managers, who see the estimated outlay reduced by 58%. Banca Mediolanum, of which Fininvest is the second shareholder with 30.12%%, would see the contribution drop to 30 million, 64% less according to Deutsche Bank's estimate, 79% less for UBS”.

DE MATTIA'S COMMENT (EX BANKITALIA)

“The substantial revision of the rules regarding the tax on the so-called 'extra profits' of the banks, announced by the Government, is positive and goes in the right direction of the correct relationship between the public authorities and the latter”, wrote today in the newspaper Il Messaggero . columnist Angelo De Mattia, already at the top of the Bank of Italy with the former governor Antonio Fazio: "All in all, one could say "ex malo bonum": starting from a text that had aroused criticism and divisions there was the ability to formulate an overall unifying proposal which, first of all, with the reference to the tax ceiling of 0.26 percent on the average risk-weighted asset should effectively dispel the danger of a new tax concerning the performance of public securities which are risk-free. And this precisely in a phase in which there is an extreme need for an easy collection of savings by the Treasury". “But no less relevant is the option that is introduced – as an alternative to being subject to taxation – of allocating an amount equal to two and a half times the value of the tax to a specific reserve for thus strengthening the assets of the institutes".

Could further specific destinations be envisaged? “It needs to be verified – according to De Mattia – Is a new model created that “taxes or strengthens assets” with the possibility in the latter case of increasing the disbursement of loans? It is not certain, but the solution found is also a balancing act so as not to contradict the taxation path previously taken, on the one hand, and, on the other, to take into account the observations of the ECB and the ABI, with the latter it is expressed only in parliament. The principle remains with the related appreciable social purposes that originally inspired the regulatory intervention, but it is reconsidered from different aspects, including constitutional ones, and in fact it is excluded that on the revenue of a tax of this kind, which must be " one-off”, we can trust in stable public finance measures. It is also expected that the costs of the operation, in particular taxation, cannot be passed on to the banks' customers and the Antitrust will monitor this prohibition.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/modifica-imposta-extraprofitti-banche-reazioni/ on Tue, 26 Sep 2023 06:59:24 +0000.