The entity, which until now maintained a payout of 40%, announces this objective for the next three years on its Investor Day
Banco Santander is hooked on the dividend to try to boost its price and maintain the favor of shareholders, who have long expected the entity to fulfill its promise to improve the part of the profit that it allocates to remuneration (payout). After record profits of 9,605 million euros in 2022, the bank has taken advantage of its Investor Day, which is held this Tuesday in London, to announce that it will improve that percentage to 50% in the next three years (2023-2025), from 40%. current, which was the lowest figure among the Ibex banks.
Now, the Cantabrian entity would be ahead, for example, of BBVA, which maintains a payout target of between 40% and 50% (in 2022 it stood at 47%). CaixaBank would continue to lead with a distribution target of between 50% and 60% of the profit.
As they clarify, the target payout “will be approximately 50% of the attributable net profit (excluding impacts without effect on cash or direct effect on capital ratios), distributed around 50% in cash dividend and 50% in repurchases of Actions”. They add, however, that the application of the shareholder remuneration policy “is subject to future internal decisions and regulatory approvals.”
“Today we announce plans to achieve profitable growth by building a digital bank with branches with the encouragement and support of Santander’s global network,” said the bank’s president, Ana Botín. “Our results show that our business model works,” she stressed during the presentation of the new plan.
Regarding the payment corresponding to 2022, the entity will submit to a vote at the next general meeting of shareholders, scheduled for March 31, 2023, a final cash dividend per share of 5.95 euro cents per share charged to the results 2022. With this, the total cash dividend for the year will be 11.78 euro cents per share, 18% more than the previous year.
Santander has also announced a new share buyback program worth 921 million euros, after having received the corresponding regulatory approval.
Once this phase is completed, the total shareholder remuneration for 2022 will have been 3,842 million euros (around 40% of ordinary profit for 2022), divided between cash dividends (1,942 million euros) and share repurchase (1,900 million euros), which represents an equivalent return of over 8%.
market reaction
The dividend was the main issue in a day in which Botín also offered investors the new growth guide for the next three years, in an environment of rising interest rates that favors the sector’s margins. And the reaction has been positive, with increases of more than 2% in the stock market at mid-session, on a day in which the Ibex-35 advances 1%.
Within its new roadmap, one of the figures that has best served the market is that of the new profitability targets. Specifically, Santander aspires to shoot the ratio (measured by the Rote) to a range between 15% and 17%, from 13.4% at which it closed 2022.
Another of the great objectives will be the responsibility of the new CEO, Héctor Grisi: to increase the number of clients by 40 million until 2025, which will bring the total to around 200 million. “We are confident that we will achieve this thanks to our technology, experience and the great team at the bank, which has done an excellent job in recent years. We intend to accelerate our plans to offer the best experience to our clients, with which we will also become the most profitable bank in each of our markets”, said Grisi.
The idea is that the new plan contributes to increasing income by around 7%-8% per year on average in the period 2023-2025. “In addition, the bank is carrying out a transformation that will allow it to improve the efficiency ratio from 45.8% to approximately 42% in 2025,” they indicate from the entity. This ratio is also key for the market and the lower the better, since it defines the income an entity obtains and the expenses it incurs to obtain such income.
Early analyst reports also give the plan their thumbs up. Goldman Sachs points out that the bank has exceeded the first consensus estimates with its new targets, especially in terms of profitability. The firm gives the bank a 12-month target price of 5.30 euros, with a buy recommendation, which implies an upward potential of more than 40% compared to the 3.73 euros currently around.
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