The great European banks have decided to walk in unison towards exiting the current crisis by increasing their share buyback programs to channel excess capital to their shareholders. In total, among the twenty largest listed entities in Europe, seventeen have announced new buybacks from the third quarter of 2021, for a total amount of 22,915 million euros. This quantity represents 3.10% of its capitalization on the whole. With an average dividend yield of European banks of 6%, added to repurchases, shareholder remuneration rises to 9%.
With the pistol shot exit from the European Central Bank (ECB) on October 1 of last year, community banking has opened the door to a new way of remuneration through repurchase shares and then redeem them. And it has a double positive impact, on the one hand for the shareholder since his participation will be greater once those titles are drained from the market; and on the other hand, for the company itself since the future cash dividend will be lower if the number of outstanding shares is reduced. Check here the calendar of upcoming dividends of the Spanish stock market
Five months after the financial sector -also the insurer- took a breather regarding its regulatory limitations, the vast majority of entities have resumed pre-Covid remuneration policies, to which they have added an extra: share buybacks. The average dividend yield of the Stoxx 600 Banks has once again exceeded 5.5%, helped by the latest falls of the sector. It must be taken into account that the largest European entities have lost 10% on the stock market since the outbreak of the invasion in Ukraine, and this has led them to losses in 2022 close to 5%, when they came to lead purchases in the eurozone, with an advance of more than 10% before everything was blown up; also the forecast of rises in interest rates in the euro zone.
The market has passed in less than a month of discounting two rises in the price of money in the eurozone; none -after the start of the war-; to two, again, in October and December after the words of the president of the ECB, Christine Lagarde, in which she took a step forward following in the footsteps of the Fed (which increased rates last week by 25 basis points).
Spanish banks
BBVA is the entity that, percentage-wise, has a greater repurchase of shares in force. The 3,500 million euros that the bank will allocate to buy back shares currently represent9.9% of its capitalization. It began last November and will not extend beyond twelve months. In total, and according to calculations by the entity itself, it will distribute 15% of its capitalization among shareholders. From Credit Suisse they do not rule out that the entity, “assuming that it maintains a payout close to 40%, can approve a new repurchase of additional shares of 10% for the year 2022-2023″. To this is added a cash dividend of 31 cents, which yields 5.8% at current prices. The complementary will arrive on April 8, with 0.23 euros.
CaixaBank has the second largest repurchase announced when compared to its capitalization. The entity will invest a maximum of 2,300 million euros in repurchasing a maximum of 10% of its shares. Currently, it is equivalent to 9% of its capitalization. In addition, it will pay a cash dividend of 0.146 euros that will be paid on April 20.
In January, Intesa San Paolo started a new program of buyback worth 3,500 million (8.4% of its market value) which will foreseeably extend until 2025. It will be accompanied by a 70% payout in its strategic plan. This places the Italian entity at the head of shareholder remuneration, with a dividend yield of 8.5% expected for this year.
ING since January has implemented a program to seize 1,774 million euros in bank securities
Nordea Bank is the four bank with the most relevant buyback. will allocate 2,000 million euros to redeem shares, and this is 5% of your current capitalization. Behind is ING, which since January has implemented a program to seize 1,774 million euros in bank securities (3.7%) and must end in May at the latest.
Four other entities have announced repurchase programs of more than 1,000 million euros. These are HSBC (with 1,760 million); Banco Santander (with 1,318 million euros planned); another British, such as Lloyds (with 1,200 million euros); and Credit Agricole (with 1,058 million euros). French banks will redeem an average of 3% of their outstanding shares in the coming months, for which they have announced programs for an amount of 2,873 million euros.
Spanish dividends
BBVA has the most profitable dividend in the sector in Spain, at 5.8%, thanks to the gross cash payment of 0.31 euros per share. Added the buybackthe remuneration goes to 16.2%.
It is followed by CaixaBank -with 14.6%-, although only its payment in cash yields 4.8; the second most attractive in the sector in Spain, ahead of Bankinter. The entity Orange distributes 0.24 euros, with a return of 4.5%. Sabadell with its 3 cents is also above 4%.
Unicaja subscription (0.0259 euros) income 2.8%, ahead of 2.4% of the 0.08 euros of Santander without repurchase.
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