2  BIS Review 100/2008  Italian banks’ income and capital Excluding capital gains and extraordinary income, the profits of the five largest Italian banking groups fell in the first three months of this year by about a third compared with the same period of 2007; the rate of return on equity fell on an annual basis by nearly five percentage points, to about 9 per cent.
The deterioration began in the third quarter of last year. Contributory factors included the decline in fee income, caused mainly by the contraction in asset management activity, the losses on securities trading and portfolio writedowns. In 2007 the tier 1 capital ratio of the largest groups fell slightly, from 6.8 to 6.5 per cent on average, although it remained above the regulatory minimum.