Italian bank shares rebounded on Wednesday after the government watered down a surprise windfall tax on excess profits announced earlier this week. City analysts estimated that the Monday announcement of a 40% tax on excess income derived from higher interest rates in 2023 would deal a 19% blow to Italian lenders' net profits for the year. Shares of BPER Banca, Banco BPM, Intesa Sanpaolo, Finecobank and UniCredit all fell sharply during Tuesday trading wiping out more than 9 billion euros from the market capitalization of the Italian banking sector. Finecobank shares recovered 6% by mid-morning on Wednesday, while Unicredit and BPER Banca were both up by more than 4%. "Initially, right after the announcement of the windfall tax on Monday evening, the government reiterated that they were expecting to raise around 3 billion euros in tax, but then the market realized that the numbers didn't add up," Rania explained.

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Persons: Gianmarco Rania, Rania Organizations: Banca, Banco, Citi, BPER Banca, Banor, CNBC