European Banks Face Rising Windfall Tax Risk as Profits Surge

European governments are increasingly targeting banks for windfall taxes on elevated profits, a trend that has been building since the 2023 rate-hike cycle. The risk is that fiscal measures, such as Italy's 2023 levy or Spain's ongoing tax, could expand across the bloc, pressuring bank earnings and equity valuations. Uncertainty centers on the scope and timing of new taxes, which could weigh on sector sentiment despite strong profitability.