By Valentina Za
MILAN (Reuters) - State-owned Monte dei Paschi di Siena does not expect the latest amendments to a one-off Italian tax on lenders to cost it more, while a newly introduced option to set aside funds instead of paying the levy appears sensible, its CEO said.
Last month, the Italian government announced a surprise 40%bank tax for 2023 that triggered a plunge in the shares of Italian lenders. It has since introduced an amendment that gives banks the option to set aside 2.5 times the amount of the tax to strengthen reserve buffers.
Speaking to CLASS CNBC television on Wednesday, Chief Executive Luigi Lovaglio said Monte dei Paschi (MPS) had calculated a hit of around 120 million euros ($127 million) from the tax, and that should still apply under the latest terms.
Asked if the bank would boost capital reserves, Lovaglio said the decision lied with the board but it is "clear that the option appears as a logical one."
Analysts have said MPS, which is currently planning to resume dividend payments on 2024 earnings, was expected to make use of the opt-out clause.
Stronger lenders such as Intesa Sanpaolo (BIT:ISP) and UniCredit (LON:0RLS) are expected instead to pay the tax to retain a free hand in distribution decisions.
If banks boost reserves these would be un-distributable and could only be paid out later by paying interest on them.
Lovaglio said management is focused on the bank's business plan and boosting its market value, when asked about potential mergers as a way to cut the state's 64% stake.
While its good results have put MPS back on the radar of long-only investors, its current market valuation did not reflect the bank's performance, he said.
Lovaglio reiterated his long-held view that mid-sized lenders, such as MPS or rivals Banco BPM (LON:0RLA) and BPER, would fare better if they joined forces.
However, any such decision was a matter for the state as a shareholder.
The executive said the first signs of difficulties for retail borrowers from higher interest rates were emerging but guidance for this year's provisions remains unchanged at 0.55% of the loan book.
He added MPS had started offering deposits with a pre-determined maturity to boost its deposit base.
($1 = 0.9486 euros)