The bank increases its excess capital by 5% despite distributing record dividends

In terms of capital, the bank has done its homework well. Despite the fact that the European Central Bank (ECB) has raised the minimum capital requirements for 2025 by 3.5 billion euros, Spanish entities remain well armed. According to data from the end of September, The six listed banks accumulate 47,651 million euros in excess capital on Frankfurt requirements. A cushion that increased by 5% compared to a year ago, despite the fact that the bank distributed record dividends to its shareholders as a result of historic profits, boosted by high interest rates for a longer period of time.

Capital measures the absorption capacity of entities against unexpected losses. From there, A higher capital ratio is a symptom of more solvency. However, too high levels of capital can hinder banks’ efficiency. The supervisor has the habit of recommending the accumulation of more solvency, a message that has intensified in recent months in the face of economic uncertainty, especially in Europe, and the drop in interest rates.

Each of the banks decides to operate with more or less cushion over the minimum capital required by the ECB based on their own business management. But beyond the demands of the institution chaired by Christine Lagarde, banks usually establish internal capital objectives and, from there, also determine their shareholder remuneration policy.

Financial muscle

All banks largely comply with the Frankfurt requirements, but in absolute terms Santander is the one that exhibits the most muscle in absolute numbers to resist unexpected storms. Its solvency rose to 12.5% compared to the 9.67% required by the ECB, which translates into almost 17.5 billion in excess capital. In addition, the entity chaired by Ana Botín sets its minimum internal CET1 target at 12%, so it would have almost 3,000 million more that it could potentially distribute to the shareholder.

BBVA is not far away. At the end of the third quarter of last year, it recorded a solvency of 12.84%, more than two percentage points above the 9.13% required by the ECB. Therefore, its surplus capital would exceed 14,000 million. The internal objective of the Basque entity would be between 11.5% and 12%: being as strict as possible, the bank headed by Carlos Torres would have 3,000 million left in capital. And, in the middle of the takeover bid launched against Sabadell, The market is particularly expectant about any news regarding its remuneration policy.

The oppressed bank, Sabadellyou will also have a good mattress for take out your claws and try to seduce the shareholders. Its surplus capital is close to 3,900 million with a solvency of 13.80% compared to the 8.95% requested by the ECB. Furthermore, when BBVA launched its takeover bid, the Vallesan bank froze a share buyback program of 340 million euros that could be reactivated at the annual meeting if shareholders approve it. Among the six listed banks, Sabadell is the one that has set a higher internal solvency target, 13%. Even so, it has excess capital of 639 million above its ambition and on which investors have already set their eyes.

In the case of CaixaBank, the additional capital over the ECB’s demands exceeds 8.1 billion and remains at around 460 million with respect to its new and more conservative internal objectives. In its 2025-2027 strategic plan made public in November, it escalated its solvency target from 11-12% to 11.5-12.5%, with a commitment to invest any surplus above the threshold between share buybacks and dividends to improve investor remuneration.

An unusual case is Bankinter, which does not make its internal capital target public. Even so, its CET1 of 12.56% is well above the 7.81% required by the ECB, which represents an excess of almost 2 billion euros. An amount similar to that exhibited by Unicaja, which has a solvency of 15.4%, almost double the 8.21% required by Frankfurt. Of course, compared to its minimum internal threshold, 12.5%, the excess capital would be 850 million.

Generous dividends

A tight monetary policy has provided banks with historic results, which has allowed them be more generous with shareholders and distribute higher than usual dividends. The ECB cut rates four times last year and the market expects more cuts in the coming months amid lower inflation. The entities say that the increase in volume in their businesses will offset the drop in interest margin, but the big question will be whether they will be able to maintain shareholder remuneration as attractive as in 2024.

“Although profitability drops a little, organic capital generation will be sufficient to sustain current capitalization levels and keep the dividend policy intact. The price has recovered after a long season in which it has been more depressed due to the lack of profitability and now it is reasonable for the investor to ask to see his position in the banks remunerated,” said S&P analyst Luigi Motti.