By Giuseppe Fonte and Valentina Za
ROME (Reuters) - Italy's Intesa Sanpaolo (BIT:ISP) is leaning towards making use of a clause in a newly-introduced extraordinary bank tax that allows lenders to skip payment in favour of boosting reserves, a source with knowledge of the matter said.
Italy's conservative government shocked markets in August by announcing a one-off 40% tax on banks' net interest margin (NIM). It later amended the measure to give banks the option to boost reserves by an amount equivalent to 2.5 times the tax.
Banks' boards will take a decision on whether to opt out of the tax and beef up capital reserves when meet to approve third-quarter results.
If lenders decide to boost reserves they do not need to do anything, while a decision to pay the tax would lead to a charge being booked on the income statement.
Intesa (LON:0HBC)'s board meets on Nov. 3 to approve results for the third quarter and a possible interim dividend. Its board will take a decision on the tax then but the source said the bank was leaning towards using the money to boost capital.
A spokesperson for Intesa declined to comment.
Sources told Reuters earlier this month Italy risked collecting minimal proceeds from the levy because banks can opt to set aside the money as capital reserves.
Italian Economy Minister Giancarlo Giorgetti has said the government has not budgeted any spending on proceeds from the levy, whose final result will be that of strengthening banks' capital buffers so that they can keep lending to customers.
The law does not stop banks from keeping shareholder remuneration unchanged by distributing the additional capital via share buybacks.
However, a decision to pay the tax could hurt shareholders if it affected the net income and, as a consequence, dividends.
That would be the case for Intesa which, as recommended by the European Central Bank, sets a target for dividends as a share of net income, of which it aims to pay out 70% in cash every year.