 "Moody's")
The Italian government's decision to impose a windfall tax on banks, if implemented in its current form, would significantly hit banks' net income and be "credit negative" for the country's banking sector, Moody's Investors Service said.
The tax "would increase banks' total tax burden, lower profits systemwide and significantly reduce the benefit of increased interest rates to the sector", the agency wrote in a report dated Aug. 9.
"If implemented in its current form, (the tax) would account for about 15% of the banking system's 2022 consolidated net income," Moody's noted.
Announced late on Monday, the tax targets banking profits deriving from higher interest rates but will not amount to more than 0.1% of their total assets.
Moody's added that the windfall tax would also add to other constraints on Italian banks' profitability, such as subdued lending activity, increased operating expenses from high inflation and a gradual rise in funding costs.
(Reporting by Alessia Pé, editing Federico Maccioni and Keith Weir)
