Banco Santander is about to complete its third share repurchase program in the last twelve months with the final objective of amortizing them and reducing its capital as an indirect reward to its nearly 4 million shareholders. The entity has notified the CNMV this week that the volume of treasury shares has risen from 0.55% to 1.4% of its capital after the latest operations until the middle of this month.
Santander launched this plan on November 22 for a maximum amount of 978 million euros, which may be extended until January 31, 2023. However, until December 20, the entity had already executed up to 57% of the plan after going public with 202 million titles with a disbursement of 561 million euros, at a rate of 2.77 euros each. The bank self-imposed a limit of 4.31 euros per share for these operations, although its price is 35% below.
More than 2,700 million euros
Santander established its buyback programs after its rival BBVA announced a plan of up to 3,500 million euros with the money obtained from the sale of its subsidiary in the US. The group chaired by Ana Botín will allocate with its three operations just over 2,700 million to buy its own shares on the stock market, which exceeds the 1,800 million that Caixabank has invested in doing the same. In total, the three banking giants of the Ibex 35 have allocated 7,650 million to purchases on the treasury stock market.
For the moment, the Cantabrian group has made two amortizations in 2022 by eliminating 546 million of its own titles, 3.1% of its capital, to which it will add a third in 2023. For the first time since there are records, the bank has reduced the number of shares after expanding it up to 63 times since 1991, according to CNMV records, due to the succession of corporate operations and dividend payments (scrip) in kind that the bank made starting in 2009.
After the restrictions for the distribution of dividends and share repurchases imposed by the European Central Bank (ECB) due to the pandemic in 2020, Santander inaugurated a new shareholder remuneration policy in 2021 through which it will distribute 40% of the profit ordinary (pay-out) with two cash payments in November and May, as well as share repurchase programs for an equivalent amount.
With the acquisition and subsequent amortization of the securities, Santander achieves several objectives. On the one hand, it increases the value of the remaining titles that will be creditors of a higher Earnings per Share (EPS). Secondly, the valuation of investors also increases due to this automatic effect and, thirdly, the participation of its current shareholders rises without having to pay more money. In short, the attractiveness of its value on the stock market is growing compared to a previous scenario in which both dividends and increases have a dilutive effect for the firm.
Investors have not yet responded to Santander’s movements, which are at the bottom among Spanish banks in 2022. Caixabank, Bankinter and Sabadell have risen by around 50% since January, while BBVA has risen by around 15%. On the other hand, the entity based in Boadilla del Monte is about to close the year in the red on the stock market with an accumulated fall of 1.8%, adjusting the dividends paid.