At the meeting Ecofin in Brussels, the finance minister Giancarlo Giorgetti asked Italian banks to raise rates on deposits, and adjust them to rate increases in the Bce. Portugal and the Netherlands have also made the same request to their credit institutions.
The finance minister made the comments noting that lending rates were hiked rapidly following the ECB’s monetary tightening, while deposit rates remained unchanged despite monetary policy adjustments. Giorgetti made it known that the government would not remain indifferent to this phenomenon by fueling the rumors of a tax soon on extra profits.
The analysts of Mediobanca Securities, argue that at this point cannot “exclude the introduction of a tax on banks”. However, the same Italian institutions “did not charge negative interest rates on deposits during the years when the cost of money was below zero.”
In the first three months of the year, Italian banks recorded profits of over €5 billion. The Mef is attempting to cancel the contractual changes to the detriment of account holders, an alternative to a possible government intervention considered increasingly likely, following the moves of the Spainwhere the socialist government of Pedro Sánchez introduced a levy of 4,8% sul margine d’interesse (NII).
For example Unicredit e Intesa Sanpaolo saw their interest margin grow at the end of March, which derives from lending and financing activity, respectively by 44 he was born in 53%. And the other institutes travel on these same levels.
Meanwhile, the CEO of Unicredit, Orcel he has already said no to taxing the extra profits of the banks “because they play a social role”, on the occasion of the presentation of the first quarterly numbers, best ever.
Banks, the race for new customers will begin in June
In June there will be another important factor to consider: European banks will have to pay back in one fell swoop ECB €477 billion of loans that will mature under long-term refinancing arrangements (TLTRO). The ECB budget will be reduced by the same amount (without considering the Qt or Quantitative Tightening) and the consequences could also be felt for government bonds, given that the banks have also used the Tltro funds to buy government bonds. Between November and March there have already been repayments of institutions for €980 billion.
Specifically, Italian credit institutions will have to repay in full 318 billion euros in loans to the ECB. The amounts remaining after June will return to Frankfurt by December 2024. As a result, the need will come to fill the liquidity holes, attracting new customers with more attractive deposit rates.
The view of Mediobanca analysts
Despite futures for the banking sector, most analysts remain positive on the Italian banking sector as current prices already discount the decline in profitability.
According to Mediobanca analysts a possible fee on the banks would represent “aunexpected negative evolution, particularly for weaker groups.” The estimates of Mediobanca Securities prudently discount a buffer of caution on the interest margin (calculated at 2.5%, with a 30% deposit beta, it is the percentage of the ECB rate hike that the banks pass on to account holders – in 2023 and a 40% in 2024) and a approximately 50% increase in credit losses in the two-year period 2023-24 compared to 2022.
Banks, here are which ones could be most affected
According to the first quarter numbers, the lenders that recorded the biggest gains are Intesa Sanpaolo, Unicredit, Banco Bpm, MPS, Bper, Credem and Banco Popolare di Sondrio. Together they recorded profits exceeding 5 billion, double the forecasts and triple compared to the first quarter of 2022. So it is imagined that if a tax on extra profits were to be introduced, they will be the first to be affected.
The numbers show that the increase in interest rates by the ECB has in a certain sense favored the banking system and its shareholders, but, at the same time, disadvantaged customers.