Lloyds Banking Group PLC (LSE:LLOY) and UK banking stocks have rallied after the Italian government watered down plans for a windfall tax on Italian banks.
Late Monday, Italy’s government surprisingly decided to impose a 40% windfall tax on its banks which caused sharp falls in banking stocks in Italy and Europe on Tuesday.
But late Tuesday, the Italian finance ministry said in a statement that the tax on net interest income would be capped at 0.1% of assets, much lower than feared.
Deutsche Bank said such a cap would reduce the overall size of the tax by over 40%, though it would still take more than 10% from 2023 profits.
Lloyds, Barclays PLC (LSE:BARC) and NatWest Group PLC rose 1.2%, 1.7% and 1.0% respectively while in Italy banking stocks also climbed.
Italy’s banking index is up 2.7% in early trading while the country's largest bank, Intesa Sanpaolo, is 2.4% higher.
FinecoBank Banca Fineco rallied 4.7%, UniCredit gained 3.1% and Banca Monte dei Paschi di Siena firmed 3.4%.