In those results, published this week, the Italian lender showed a boost to its indicative fully phased in Basel III CET1 ratio, which rose 27bp versus the end of 2014 to 11.8%.
The figure is indicative because it includes the net income generated in the first quarter, as well as a reduction in the bank’s risk weighted assets to be booked in the second quarter after the conversion of €689m of deferred tax assets (DTAs) into tax credits.
The European Central Bank is investigating whether periphery banks’ use of DTAs, which are discounts on future tax bills built up in times of loss, to improve their capital ratios counts as illegal state aid.
Should it decide regulation is needed to prevent banks using DTA credit conversion, banks that have a sizeable portion of their CET1 bucket could be hit hard.
Banco Popolare held just over €3.5bn in DTAs, equivalent to around 62% of its CET1 capital, at the end of 2014, according to data compiled by SNL Financial on April 14.