Are Spain and Belgium a flavour of things to come?
In July the Spanish government announced its intention to extract EUR1.5bn of additional tax from banks annually over 2023/24 to reduce the budget deficit. And in August the Belgian government announced its intention to increase DGS contributions. This has led to concerns that the sector, which is about to enjoy the tailwind of higher rates, will lose it to higher levies. This report explores all existing taxes paid by the banks we cover and discusses the outlook in each country.
Banks today are much improved, but they are far from over-earning.
Over FY14-24e, European banks will have paid c.EUR150bn of Bank specific levies and taxes and added c.EUR250bn of capital in order to improve ET1 ratios. Added to the bail-in directive, the taxpayer should feel insulated even in the face of deteriorating economic conditions. This report argues that it is way too soon to talk about banks overearning: the sector would generate c.EUR65bn more revenues if it had maintained its revenue margin at the level it generated in FY12 when Euribor approached 0% for the first time.
Who is the most penalised currently? Who will benefit from a reduction in contributions?
Our analysis suggests that French, CEE-exposed banks and Fineco are the most penalised by Bank levies and taxes, with 2pp of ROTE lost to them. As the European Single Resolution Fund and Deposit Guarantee Schemes reach target levels in the next couple of years, we expect a halving of Bank levies and taxes to c.EUR8.4bn in FY25e. On average, 12% of the sector''s PBT growth over 22e-24e should come from falling levies with 100% for some of the banks.
Where are we vs consensus after trimming our Spanish (8-9%) and KBC (1-2%) forecasts?
After the increase in levies we have implemented in Spanish and Benelux banks models we find consensus (when available) too pessimistic for Unicredit, ABN Amro and to a lesser extent CBK, RBI and ING. By contrast, some...
