The bank dividend is not in danger despite the new capital requirements demanded by the European Central Bank (ECB). Most of the changes introduced by the agency were insignificant, with the exception of KBC Group, the Belgian bank, which had to increase the cushion due to the risk of its Belgian mortgages. According to Jefferies, “European banks’ capital ratio requirements have been updated by the ECB, with little change.” For experts, it would be a sign that the capital distributions of financial institutions may continue to attract investors in the future.
And it is that as the analysts remember, all the Ibex banks have a CET 1 level, the key measure, well above the minimum that would cause the ECB to intervene. Without forgetting that the distribution of the dividend will act as a lure for investors in shares, with those entities with the greatest excess capital as the most attractive in this regard. Of the same opinion is Bank of America. The investment bank’s experts assure that they do not expect the dividend bans that occurred in 2020 due to the Covid pandemic to be repeated. “The looming recession is modest compared to a 25% GDP collapse that regulators were expecting at the end of March 2020. We also think there is now an appreciation that investors are very focused on capital distributions when considering owning bank shares.”
Spanish entities comply
Spanish banks would pass with flying colors. In the case of Banco Santander, the regulatory body requires that by 2023 it raise its CET 1 ratio to 8.91%, compared to 8.85% in March 2022 and that it remain at 7.85% at the individual level. Taking into account that risk-weighted assets closed in the third quarter at 617,000 million, and CET 1 stands at 74,653 million euros (with a ratio of 12.10%), the entity has excess capital of 20,500 millions. The total capital ratio stands at 16%. The increase for BBVA has also been minimal. The entity chaired by Carlos Torres must have a CET 1 ratio of 8.72%, from 8.60% in 2022, while the CET 1 ratio was 12.55% and that of total capital, 16.07 %, which implies an excess of almost 13,000 million.
For Banco Sabadell, the CET 1 ratio will rise to 8.65% from 8.46%, levels that do not pose any problem for the entity headed by César González-Bueno, since the CET 1 was 12.48% until September, according to the latest published data. Caixabank would also comfortably comply with the new ECB requirements, which stand at 8.44% for CET 1 and 12.66% for total capital. The entity reported ratios of 12.38% and 16.53% respectively in the third quarter. For Bankinter, excess capital will be 1,500 million euros, since the ECB’s requirement for this beginning of the year stands at 7.726%, compared to 11.90%, up to 4,298 million euros.
For Unicaja, the CET 1 ratio rises slightly from 8.21% to 8.27%. Until September it had a figure of 13.6% for the CET 1 phased in, while the total capital ratio required by the agency is 12.75%, compared to 17% of the total that the entity had.
The profitability of attractive banking
The truth is that the bank dividend has once again attracted the attention of investors, once financial institutions will begin to recover their shareholder remuneration plans in September 2021, after the ECB ban in 2020 due to the coronavirus pandemic. coronavirus. Now, they have commitments of a ‘pay out’ of 40%, for Banco Santander, up to 60%, in the case of Caixabank.
In terms of dividend yield, BBVA will continue to lead the ranking. According to Bloomberg, the entity’s dividend yield will stand out in 2023, with 7.72%, the highest among the banks listed on the Ibex, and above the final forecast data forecast for the end of this year: a four% . The next would be Caixbank, whose dividend yield will be close to 6%, while the dividend yield of Unicaja, Banco Sabadell and Santander will move in a range that will go from 5.21% to 5.18%, respectively.