(Finance) – The announcement of a tax on the extra profits of Italian banksin the form of a levy aimed at increasing the interest margin (NII) achieved by institutions thanks to the increase in interest rates, it will not affect ratings of national banks. This was stated by Fitch Ratings in a report on the subject. The levy “will reduce profitability in the short term, but will not lead to downgrades given its one-off nature and being applied at a time of cyclically high profitability and comfortable capital ratios,” it stressed.
Fitch he estimates that the levy will generate €2.5-3 billionlargely borne by the major commercial banks, Intesa Sanpaolo, UniCredit, BPM desk, BPER Bank And Bank Monte dei Paschi di Sienaas well as the cooperative banking groups Iccrea Cooperative Banking Group and Cassa Centrale Banca Cooperative Banking Group.
“These banks have experienced strong NII growth since the second half of 2022 as higher interest rates have spilled over to their assets, which are mostly floating rate, but far less to their liabilities,” the agency said. rating – Banks are largely funded by deposits and their strong franchises have allowed them to limit passing on higher interest rates to customer deposits“.
In most cases, Fitch expects the drawdown to cap at 0.1% of total assets, which on average equates to about 30 basis points of risk-weighted assets. This corresponds to the 10%-15% of banks’ net profit forecast for 2023 and will largely reverse recent guidance hikes. Overall, the erosion of internal capital generation and profitability is expected to be modest.
According to Fitch, the smaller, more specialized banks are expected to be less affected from the levy as their borrowing costs have generally risen faster as interest rates have risen, limiting the benefit to the NII. However, the levy could limit the lending capacity of some smaller banks, as they tend to have tighter capital buffers and rely more on internal capital generation to finance organic growth.
“If the levy were reneweddownside risks to ratings could arise, as the negative impact on earning capacity would reduce banks’ ability to absorb credit losses in the event of an economic slowdown – Fitch warns – This could also compromise banks’ ability to raise capital when needed, as it would undermine the attractiveness of the domestic banking sector for investors“.