(BFM Bourse) – European banking establishments fell on the stock market on Tuesday, after the downgrading of Moody’s rating on several American banks. The sector is also battered by the surprise announcement of the government of Giorgia Meloni on a tax on “super profits” made by Italian banks.
The sessions follow each other but are not alike for the European banking sector. In sight after a convincing results season, the financial establishments of the Old Continent find themselves this time once again in the sights of the markets. And this climate of mistrust has its origins in a busy news in the sector.
Monday night, Moody’s decided to downgrade the credit rating of several US banks. The rating agency also warned that it had placed six other major banks under review for possible downgrade, including Bank of New York Mellon, US Bancorp, State Street and Truist Financial. Moody’s also downgraded the outlook from “stable” to “negative” on the credit ratings of 11 banks such as Capital One, Citizens Financial and Fifth Third Bancorp.
“The second quarter results of many banks showed growing pressures on profitability that will reduce their ability to generate internal capital,” the rating agency explained in its note.
Moody’s decision to downgrade the credit rating of several US banking establishments rekindles fears about the solidity of the sector across the Atlantic, after the resounding bankruptcy of Silicon Valley Bank last March.
A tax on “superprofits” in Italy
Once again, the rating agencies give the “the” on the stock markets, one week to the day after the downgrading of the US sovereign rating by Fitch. A decision which had then caused renewed tension on the bond compartment, and by extension on the stock market indices. Including the CAC 40 which had lost 1.26% last Tuesday.
The Stoxx 600 Banks sector index lost 1.60% around 10:20 a.m. French banks show the biggest drops in the CAC 40: Crédit Agricole loses 2% – with a peak at -3.1%, BNP Paribas gives back 1.5% and Société Générale 1.15% In Frankfurt, Deutsche Bank loses 2, 2%.
But it is the Italian establishments that are suffering the most on Tuesday after the surprise decision of the government of Giorgia Meloni to apply a 40% tax on their “superprofits”. The profits of Italian banks jumped sharply in the first half, driven by multiple interest rate hikes.
This tax will finance the tax reductions announced by the Italian government and support the production of mortgage loans for new owners. Bper Banca drops 8%, Finecobank returns 7.5%, Intesa Sanpaolo -7.4%, Monte dei Paschi di Siena (Mps) -7.3%, around 10:20 a.m. in Milan.
The tax on the excess profits of banks, which must be settled by June 2024, will concern the accounting years of 2022 and 2023, according to government sources cited by AFP.
“The potential impact is not yet clear” advances KBW in its sector note. However, the design office cites Milano Finance who argues that this tax could bring in around 3 billion euros, and that this levy would not be tax deductible, according to information from He Sole also cited by KBW.
“The windfall tax would be applied to banks and not to asset managers and brokers,” says the research office, which expects the banks Fineco, Banca Mediolanum and Banca Generali to be affected by this tax.
Sabrina Sadgui – ©2023 BFM Bourse
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