Cash is king , Bank of America analysts headline one of their latest reports to speak, simply and concisely, of the abundant liquidity flowing through the markets. After years of unprecedented injections of money into the monetary system by central banks, the recovery of the economy after the Covid-19 crisis is driving many companies to invest in what they believe generates the most value for them. its shareholders; and it is nothing other than in themselves .
The buybacks Americans, so typical in the US as the 4th of July or the Black Friday and which has been exported all over the West have landed on the Spanish stock market and it seems a trend that is here to stay. Such is the fervor of companies on Wall Street to implement share buyback programs that it is even counted as one more catalyst influencing the end-of-year rally .
In Spain, there are seven Continuous Market firms that maintain active share buyback programs – ArcelorMittal, Repsol, Lar España, Vidrala, Miquel y Costas, Aedas Homes and Global Dominion -, to which two more have recently joined: BBVA and Banco Santander .
And it remains to be seen if the trend does not reach the rest of the financial sector considering its bulky liquidity buffers. At the end of the first half of the year, the six national listed banks had excess liquidity amounting to 49,000 million euros – above the fully loaded CET1 capital requirements required in each case by Brussels -, which represents 39% of its current capitalization after the last rises.
BBVA was the first to announce a share buyback program of up to 10% of the capital. It will start in November and will last a whole year, if it does not reach the announced goal earlier. The entity could allocate about 3,800 million euros to get that part of the cake at current prices. The money comes from the sale of its US subsidiary last year for about 9.7 billion euros, with which it would allocate about 40% for this purpose.
Thanks to the buyback, BBVA has positioned itself at the forefront of the sector as the most attractive entity from the point of view of shareholder remuneration. Its cash dividend, estimated at 0.20 euros gross with a charge to the net result of 2021, yields 3% to which it would be necessary to add the buyback of 10%.
On Tuesday he will pay his first payment of this year, for an amount of 0.08 euros, but it can no longer be accessed by those who do not have shares.
Banco Santander announced two days before the ban on the ECB dividend expired – on September 30 – that it also wanted to join the wave of buybacks. He has divided his remuneration into two equal parts on a payout of 40% -in the minimum of the expected range- , with which he will pay 20% in cash and the other 20% via share redemption.
To do so, it has been underway since last Wednesday, and until December, the purchase of securities worth 841 million euros, approximately 1.5% of the capital. In annual terms, their remuneration will exceed 6% of profitability : 3% for two buyback programs per year and another 3% of the payment in cash.
At the moment, no other entity has communicated a buyback plan. There is time. CaixaBank , through its financial director, Javier Pano , recognizes that if it does so, it will not be until the dividend that is paid out of 2022. This year’s dividend adheres to what was announced: 50% payout and in cash.
Renta 4 believes that Unicaja has “a capital situation” sufficiently “comfortable” to “establish a shareholder remuneration policy with a 50% payout (between cash and share buy-back)”. Sources of the entity maintain that we must wait until the start of 2022, which will be when it is communicated which policy it will officially follow.
Bankinter , for its part, already paid its first interim dividend for the current year on October 1. It has made no mention of the implementation of a buyback plan. Nor in the case of Banco Sabadell, whose first dividend is expected in the last days of December.
ArcelorMittal is already on its fifth share buy-back program in just a year with several objectives: to restore the dilution to shareholders caused by the 2020 increase for a value of 1,825 million euros and to distribute the money from the sale of its subsidiary in USA for another 1,880 million euros.
In total, these two operations represented an income of about 3,700 million, but the steel company has distributed more. Specifically, the five buyback programs total $ 4,670 million (about 4,035 million euros), 9% more. Currently, the last and most relevant of them is underway, for about 1,900 million, of which 67% has consumed at present . It will run until December 31.
The market consensus does not rule out that Acerinox can follow in its footsteps . The trigger has been the definitive exit of its shareholding from Nippon Steel , which has been dissolved in two packages of the 15.8% that it controlled in the company. If the steelmaker decided to acquire only one of them, for 7.9% of the capital, it would have a cost at current prices of about 242 million euros.
At the end of June, its treasury amounted to 991 million euros, with maturities in 2021 and 2022 of 348 million, with which there would be another 643 million of liquidity to be able to carry out the buybacks, if applicable.
Still within the national cycle, Repsol approved an ambitious shareholder compensation plan for which it has undertaken to buy back a maximum of 50 million shares per year, from 2022 to 2025 (charged to the result 21-24). In total, it will allocate between 1,400 and 2,000 million euros for this purpose. With a charge to 2021, their remuneration will be 8.5%, the result of 3.27% of the repurchase of securities and 5.2% of their payment of 0.6 euros in cash.
Outside of the Ibex 35, Global Dominion is on the verge of approving a second buyback program that will take over from the one currently in force, under the same circumstances: 5% of the capital to be acquired in the next twelve months .
With this formula, the firm will get 10% of the capital in two years and it is not trivial considering that 2021 will be its third year distributing dividends (it went public in 2016). The consensus foresees the delivery of 0.079 euros in July, three times more than last year.
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