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Santander has boosted its dividend by 50 per cent and unveiled a €1.5bn share buyback as it channels record profits back to investors in a bid to lift its lagging stock price.
The Spanish bank, which announced the plans on Monday, reported a record annual net profit of €11bn last month but faces persistent questions from investors about the wisdom of having operations across more than a dozen countries.
Santander, which along with its peers has profited from higher interest rates, said the payouts meant about 40 per cent of its pre-tax profits would be returned to shareholders, with the rest used to pay its tax bills and extend new loans.
It is the latest European bank to raise shareholder returns after enjoying the boost from central bank interest rate increases. European lenders received a €100bn windfall over the past two years thanks to the difference between the interest they pay out on deposits and receive on loans, known as net interest income.
This month, Italy’s UniCredit promised to pay €8.6bn — its entire profit haul for 2023 — to investors in dividends and buybacks. State-backed Italian bank Monte dei Paschi di Siena announced its first dividend for 13 years.
Deutsche Bank, Germany’s biggest lender, said it planned to triple its dividend and buy back more shares, and also announced job cuts.
The moves mark a stark reversal from 2020, when the European Central Bank ordered lenders to halt payouts at the outset of the Covid-19 pandemic.
Santander said it would pay a final dividend of 9.5 cents per share for 2023. That will take its total payout for the year to 17.6 cents, an increase of 50 per cent from 2022.
In addition, it said it had received regulatory approval to buy back €1.5bn of shares, starting this week. Once completed, the bank will have bought back roughly 11 per cent of its shares since 2021.
Shares in Santander — whose biggest markets include Spain, the UK, US and Brazil — have been a sector laggard. They are down by roughly a quarter since Ana Botín, one of the most influential women in global finance and the fourth generation of her family to lead the bank, became executive chair in September 2014.
In a bid to combat investor doubts about the logic of its multi-country presence, Santander last year unveiled a plan to reorganise its business into five global divisions: retail and commercial banking, corporate and investment banking, wealth management, digital consumer banking, and payments.
Since then, its shares have climbed 5 per cent, underperforming Spanish rival BBVA but doing better than CaixaBank. On Monday Santander’s share price rose nearly 3 per cent.
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