Banco Santander announced during the Investor Day celebration that it was raising the ‘pay out’ to 50%. The entity chaired by Ana Botín was one of the most backward within European banking and distributed 40% among its shareholders. With this increase, the bank offers a distribution of its profit in line with its peers, but the truth is that Spanish banks have only recovered the distribution levels prior to the pandemic (with some exceptions), after having suspended them in 202nd.
In this new stage of bank dividends, both the lifting of the suspension by the European Central Bank (ECB) in September 2021, as well as the fact that the bank has presented the best results in its history driven by the increase, have influenced interest rates and the Euribor. Precisely, the latter has allowed cash dividends per share to be higher than in past years.
For this year, everything indicates that interest margins will experience high double-digit growth, around 15-17% due to the appreciation of the mortgage loan portfolio that will be especially noticeable in the first quarter of this year, which It will allow financial institutions to once again beat their profit record. And, except for Banco Santander, the objective is to distribute half of the active profits among its shareholders.
An example is the entity led by María Dolores Dancausa has recovered its 50% ‘pay out’, set in 2018 when the bank raised the dividend by 5%. Since that year, Bankinter has maintained that percentage, except for the impasse caused by the pandemic. For its part, Unicaja Banco has announced a record dividend of 0.025 euros per share for 2022, representing a distribution of almost 49% of the profit. Unicaja Banco, before its merger with Liberbank, already distributed 40% of the profits to its shareholders (specifically in 2018)
Among the big ones, BBVA from less to more
Banco Santander 0.12 euros per share on account of 2022, an amount above 0.10 euros per share in 2021, but it is only 20% in cash. For 2023, the payment will be 25% and 50% if the repurchase of shares is taken into account. The announcement made on Investor Day allows the bank to match the dividend distribution target it had for 2019, which was between 40 and 50%. In that year, the bank distributed 46.3% of the profits obtained. However, the bank will appear the ‘scrip dividend’, by which shareholders will be able to choose between cash or delivery of shares.
However, Caixabank is called to stand out. The entity chaired by Ignacio Goirigolzarri presented in its new strategic plan very ambitious objectives for shareholder remuneration, with a ‘pay out’ objective for the period 2022-2024 of between 50% and 60%. For last year, the entity plans to pay 0.225 euros per share, which represents the distribution of 55% of the profit achieved in 2022 and 5 points more than in 2021. In 2019, a year before the pandemic, the entity (although in comparable terms is not possible as the merger with Bankia is pending) 52% of its result was distributed.
Two would be the exceptions. The ‘pay out’ of both BBVA and Banco Sabadell has increased. The bank chaired by Carlos Torres presumed to give the highest dividend in a decade on account of the results of 2021. The entity paid 0.31 euros per share, which represented a distribution of 44% of its result and in line with the ‘ pay out ‘ set between 40 and 50% of profit, while for 2022 and 2023 it maintains its dividend policy, although the improvement in profit will allow the entity’s cash payment to be raised to 0.43 last year euros per share (representing 47% of the profit). In 2019 the entity paid 0.26 euros, which presented a ‘pay out’ of 36%, in line with the target set before the pandemic of between 35-40%.
Finally, and after presenting a profit of 859 million euros in 2022, Banco Sabadell has also reviewed its dividend policy. Already in 2022, the goal was set to allocate 50%, a level that it reiterates for 2023. In 2021 it represented a ‘pay out’ of 38%, while before the pandemic the percentage of profit distributed to its shareholders was 40%, with the distribution of a dividend of 0.04 euros, the same amount that he will pay on account of the results of 2022.
share repurchase
Together with the cash payment, financial institutions have opted to undertake share buyback programs, as a way to continue displaying value to shareholders. The next step would be to pay them off. Fewer shares outstanding also higher intrinsic shareholder value. Precisely the presentation of Investor Day, Banco Santander set itself the objective for it to grow at double digits in the next three years.
Caixabank announced in its strategic plan for 2022-2024 that it will distribute 9,000 million euros among its shareholders, including both the payment of cash dividends and the repurchase of shares. For its part, during the presentation of results for the 2022 financial year, BBVA announced a new share repurchase for 422 million euros, while Banco Sabadell’s share repurchase program will be for a maximum amount of 204 million euros.
