UNCRY - Intesa Sanpaolo: 6.5% Yield And A Surprising Tax Tailwind

2025-10-27 05:00:00 ET

It would have been better to wait a week before updating my coverage on Italy's largest bank, Intesa Sanpaolo ( ISNPY, IITSF ). But we have an important development that we need to discuss ahead of earnings. This will help us once Intesa releases its Q3 report because we will know what to look for. The Italian government, in fact, is expected to raise up to EUR 5B for its 2026 budget from the country's domestic banks and insurers. Two years ago, we dealt with the windfall tax on extra profits and calculated what the potential impact of this levy could have had on Intesa and its largest peer, UniCredit ( UNCFF , UNCRY ). In short, back then, the government was targeting the extra profits these banks earned merely thanks to rising interest rates, which fattened many banks' net interest margins. In the end, many banks accepted the alternative mechanism that the government offered and booked 2.5x the extra profits as non-distributable reserves. The agreement was that in case these reserves were later paid to the shareholders, the banks would have to pay the original 40% tax on the extra profits earned in 2023 vs. 2021. The trade-off was that banks didn't have a cash outflow but had to reduce distributable equity, potentially impacting the future distributions and buybacks a bank might have been planning....

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