Italian Banks and Insurers Called to Contribute to Government's Budget Plan; Broadly Manageable Impact
Banking Organizations, Insurance OrganizationsSummary
The commentary analyses the implications for Italian banks and insurance companies stemming from the new measure announced by the Italian government on Tuesday, October 15th.
Summary highlights from the commentary include:
-- Italian banks and insurance companies will play an additional role in supporting the 2025 budget law. With the new measure, which still requires the approval of the Italian parliament, the government expects to collect around EUR 3.5-4 billion in total.
-- The contribution of the banking sector is expected to be around two-third of total, mostly from temporarily freezing the deductibility of banks' deferred tax assets in 2025-2026.
-- The projected amount of the measure would account for around 5%-6% of the aggregated net attributable income reported by banks and insurance companies in 2022 and 2023.
"In our view, pending the final drafting of the budget law, the new measure would not have a material credit impact on Italian banks and insurers considering their overall good profitability prospects and robust capitalisation, as well as the temporary nature of the measure" said Andrea Costanzo, Vice President from the Morningstar DBRS European Financial Institution Ratings team. "Nonetheless, when combined with some regulatory headwinds, this new measure could force some banks to adjust their dividend pay-out ratios, should this help protect capital buffers against higher regulatory minimum requirements."
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