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ANALYSIS-Italy private banks seek inflow oxygen from amnesty

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BANKING/ITALY (ANALYSIS)

* Lenders seen getting half of repatriated funds

* Funds returned could be 100 billion euros - analyst

* Amnesty could cover accounting fraud

By Ian Simpson

MILAN, Sept 24 (Reuters) - Italy's private banks are looking to inflows from a government tax amnesty on hundreds of billions of euros stashed abroad to help boost margins and speed up a recovery from the effects of the global credit crisis.

With legislation on the controversial amnesty still being shaped, Italy's 200-plus private banking operators are eager to get their share of the roughly half of repatriated funds that could end up in financial institutions.

Estimates by Italy's Banca Leonardo put the funds held abroad at about 600 billion euros ($887 billion), with more than 100 billion euros expected to be shipped home. Most of the money is in offshore banking hubs Switzerland and Luxembourg.

The sector, which saw its assets under management shrink 12 percent in 2008, is also looking at possible consolidation as smaller players struggle with costs and narrower margins.

The amnesty "will definitely give a breath of oxygen to the Italian private banking sector after a year of major crisis", Marco Mazzoni, president of the Magstat private banking consultancy in Bologna, told Reuters.

"Everything is in place for a successful amnesty because the national and international fight against tax havens has greatly increased the risk for those who keep undeclared funds outside the country."

Among the biggest winners from the amnesty could be Banca Generali, the private banking unit of insurer Assicurazioni Generali.

Banca Generali could see an inflow of 1.5 billion euros, especially because it could intercept funds of clients at BSI SA, the parent company's private Swiss bank, Banca Akros said in a research note.

Italy's private banking sector is dominated by subsidiaries of UniCredit SpA, Intesa Sanpaolo SpA and UBI Banca, with a total market share of about 40 percent last year, Magstat said. The top five lenders have half the market.

Italy's net inflow growth for private banks last year was 4 percent, down from 2007 but just ahead of the European average, according to a McKinsey & Co study.

THIRD AMNESTY SINCE 2001

The amnesty, Italy's third since 2001, is aimed at boosting government revenues during the country's worst economic downturn since World War Two.

Italy's measures come after it and other cash-strapped Group of 20 countries have declared war on bank secrecy.

The amnesty would let Italians wipe the slate clean on undisclosed funds hidden abroad by paying a one-off tax rate of 5 percent. The centre-right government launched it on Sept. 15 under a decree that must be approved by parliament.

However, the Senate sparked an uproar by approving an amendment that widened the amnesty to cover accounting fraud for money held abroad. It also cut the length of the amnesty period from seven months to three.

The lower house has to approve the entire package as well. About 80 billion euros was repatriated under the first two amnesties.

Fabrizio Mucci, a senior relationship manager in Milan for Swiss private bank Vontobel, said it was difficult to give a real estimate of the amnesty's impact until it was completed.

Since the reduced time period meant the amnesty would run out during Italy's holiday season, "cutting it to three months could have a very serious negative impact on its outcome", he said.

Even though the centre-right government is cutting the time period to get tax income by the end of the year, "this might have a boomerang effect", he said.

However, Banca Aletti, the private bank of mid-tier lender Banco Popolare, was upbeat about the amnesty. Franco Dentella, Aletti's deputy general director, estimated an increase in assets under management of possibly 5 percent.

"That would be a good result," he said. Aletti had 23.6 billion euros under management at the end of June, putting it in the ranks of Italy's larger private banks.

Aletti's Dentella said the collapse in financial markets along with stubborn costs had made the market ripe for mergers among smaller private banks, or takeovers.

"This would come from only bigger banks, ones with good balance sheets," he said.

Even as the cost margin -- costs divided by assets under management -- at Italian private banks remained flat last year at 43 basis points (bps), the profit margin dropped to 25 bps from 32 bps, McKinsey & Co said in a research report. The revenue margin shrank to 68 bps from 75 bps.

(Editing by Sitaraman Shankar)
 

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