“European countries differ over windfall taxes on banks…”

Italy is the latest European country to hit banks with a windfall tax in a surprise move on their profits, which have been bolstered by interest rate rises, to help mortgage holders.

Below is a snapshot of the status of windfall taxes or bank specific duties across European countries.

CZECH REPUBLIC

The Czech lower house of parliament approved a 60% windfall tax on energy firms and banks in November, aiming to raise $3.4 billion this year from profits deemed excessive to fund help for people and firms hit by soaring electricity and gas prices.

FRANCE

President Emmanuel Macron said in March that companies with more than 5,000 people should share more of their “exceptionally high” profits with employees instead of buying back shares. But he and Finance Minister Bruno Le Maire have ruled out the possibility of a windfall tax.

That is because French banks are subject to an anti-usury law that limits the pace of quarterly growth in loan prices.

France also has a popular regulated savings scheme, which accounts for just under 20% of bank deposits, with an inflation-linked return that adjusts more quickly than loan rates.

GERMANY

For some of Germany’s biggest banks, net interest income has risen between 50% and 70% from the lows of the pandemic era, but a windfall tax has not been a topic for discussion under pro-business Finance Minister Christian Lindner.

Germany’s finance ministry declined to comment on Italy’s move in August but noted that tax increases are ruled out under a German coalition government agreement.

HUNGARY

Hungary’s government has tweaked windfall taxes imposed on key sectors of the economy in a decree published in June, saying banks can reduce their 2024 windfall tax payments by up to 50% if they increase their Hungarian government bond purchases.

It also imposed a new 13% “social tax” on certain types of investments, including investment notes and interest rate gains on bank deposits.

ITALY

Italy approved on Aug. 8 a one-off 40% tax on profits banks reap from higher interest rates and it plans to use the proceeds to help mortgage holders. It expects to collect less than 3 billion euros ($3.3 billion) from the tax, according to sources.

The Italian economy ministry later clarified that the tax cannot be higher than 0.1% of lenders’ total assets. A media report on Aug. 18 said the European Central Bank (ECB) is preparing to send a letter to Italy raising objections to the tax and criticizing Rome for not previously informing either the Bank of Italy or the ECB as it is supposed to do under European Union rules.

LITHUANIA

Lithuania’s parliament approved in May a windfall tax on the banking industry’s net interest income for 2023 and 2024 following a sharp rise in European Central Bank interest rates.

The 60% levy on the part of net interest income that exceeds the average of the previous four years by 50% is estimated to raise 410 million euros ($451 million) for the government’s budget, and will be used to boost the military.

SPAIN

Spain intends to raise 3 billion euros by 2024 from the windfall tax on banks it approved last year which imposes a 4.8% charge on their net interest income and net commissions above a threshold of 800 million euros.

SWEDEN

The Swedish Government started in January last year a “risk tax” for institutions with liabilities linked to Swedish operations of more than 150 billion Swedish crowns ($14.1 billion) to strengthen public finances and create space to cover the costs that a financial crisis could cause.

The tax was equal to equal 0.05% of liabilities in 2022 and it increased to 0.06% in 2023.

It is expected to raise 6 billion Swedish crowns a year.

Inflation slows down in France, struggling UK economy avoids stagnation with 0.2% growth

France’s inflation dropped to 4.3% in July, the lowest level since February last year, while the UK economy has avoided stagnation, growing 0.2% between April and June.

Two of Europe’s biggest economies received good news on Friday, with inflation dropping to the lowest level since February 2022 in July in France, and the UK avoiding stagnation after reporting a modest growth of 0.2% between April and June.

Consumer price inflation in France slowed down to 4.3% last month from 4.5% in June, with energy prices falling by 3.7% year-on-year. Food prices, on the other end, were still 12.7% higher in July 2023 than a year before – though they were down compared to the 13.7% year-on-year recorded in June.

The price of transport also rose by 5.4% in the last 12 months, while communication services are now 6.1% cheaper compared to last year. The category “rents, water and household waste collection” has increased by 3.1% over the past year. The price of tobacco rose by 9.8% year-on-year.

Core inflation, which excludes prices subject to state intervention and products with highly volatile prices, fell from 5.7% in June to 5.0% in July year-on-year. 

Despite the slowdown, inflation in France remains well above the European Central Bank’s ideal target of close to, but below 2%.

The UK, which has been battling with inflation higher than most of Western Europe at 7.9% in the 12 months to June 2023, has avoided officially entering what’s known as stagnation – a prolonged period of little or no growth.

The country’s economy’s recent growth, 0.2% in the second quarter of the year, is better than experts expected, and better than in the first three months of the year.

“The manufacturing sector had a particularly strong month,” especially in the automotive and pharmaceutical sectors, noted Darren Morgan, the director of economic data for the Office for National Statistics (ONS).

The hot weather in June also helped the construction, accommodation, and food sectors.

“The measures we are taking to fight inflation are starting to pay off,” Finance Minister Jeremy Hunt said, adding that “the Bank of England now expects us to avoid a recession.”

Inflation-wise, the UK remains the worst off among all G7 countries.

Malta:

MeDirect’s tech-driven strategy delivers a €10.1 million profit after tax in the first half of 2023

MeDirect Bank announced a profit after tax of €10.1 million for the six months ended 30 June 2023. 

Whilst achieving these results, MeDirect continued to launch new products, grew its customer franchise and further expanded its specialised lending platform. These accomplishments were facilitated through MeDirect’s investment in technology, which is producing tangible results for the Bank and its customers.

During the first half of 2023, MeDirect launched a range of new products. In Belgium, MeDirect launched its MeManaged product, an online discretionary management service with portfolio management provided by MeDirect, using fund products managed by BlackRock, the world’s largest asset manager.

In Malta, MeDirect began to offer its MeMax instant savings account as well as a new Property Loan product for clients purchasing real estate as an investment.  In June, MeDirect launched its online debit card service, enabling customers to use their MeDirect accounts for their daily banking needs.

MeDirect’s technology also enabled it to streamline its mortgage application process and to continue to improve its payment hub platform.

Malta Company Announcements:

Grand Harbour Marina plc

The Board of Directors is scheduled to meet on Friday, 25^th August 2023 to consider and approve the interim financial statements for the six-month period ended 30^th June 2023.

VBL plc

The Board of Directors is scheduled to meet on Monday, 28^th August 2023 to consider and approve the interim financial statements for the six-month period ended 30^th June 2023.

M&Z plc

The Board of Directors is scheduled to meet on Tuesday, 29th August to consider and approve the interim financial statements for the six-month period ended 30^th June 2023. The Directors will also consider the declaration of interim dividend.

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