Banco Santander’s board has agreed to hold the next general shareholder meeting on October 26-27. In line with what was announced in July, there will be a request to approve a bonus capital increase to distribute new shares equivalent to 0.10 euros per share as a complementary dividend for 2019. It would be paid this year and bring the total remuneration for 2019 to 0.20 euros per share, equivalent to a 40% payout.
In addition, the Board will also propose the approval of a cash dividend charged against 2020 results of 0.1 euros per share, to be distributed in 2021 against the share premium reserve. The payment of this fixed amount is subject to the ECB’s recommendations and authorisation. It is also conditional on Santander’s capital ratio CET1 remaining within, or exceeding, its target of 11-12% after payment. Furthermore, the total amount to be paid must not exceed 50% of the consolidated ordinary (recurrent) profit for 2020. This proposal implies a dividend of 1.661 billion euros. According to Renta4’s calculations, this would represent a pay-out of 27% of 2020 net profit.
In April, Santander’s Board decided to cancel payment of the final dividend for 2019 and the dividend policy for 2020. However, with regard to the 2020 dividend, due to the greater visibility on the crisis, current capital levels and the evolution of ordinary results for the first six months of the year, the bank had already expressed its intention on July 29th to implement a 100% cash remuneration policy. This would be subject to regulatory recommendation and approval, and as soon as market conditions normalised. For this reason it reserved six points of capital CET1 until June, maintaining its objective of 11-12% and already putting the ratio at 11.84% in the second quarter. The Board considers that the proposed cash distribution from the share premium reserve is consistent with the objective of paying shareholders 40-50% of the consolidated ordinary (recurrent) profit and to do so in cash. Provided that there are no rules or regulatory recommendations advising against its distribution on the payment date, expected in 2021.
For Bankinter, the positive effect of this news is limited in the short term. Firstly because the ECB’s decision is unlikely to be known until the end of 2020/beginning of 2021. And secondly, due to the fact that the flow of news on the sector does not go hand in hand with it.
In fact, it was revealed yesterday that the market is anticipating sanctions for possible deficiencies in the control of money laundering by some institutions during 1997-2017. The study prepared by the International Consortium of Investigative Journalists (ICIJ) – known as the Papers of Panama – cites DB, Commerzbank, JP Morgan, HSBC, Chartered Financial, Barclays and BNY as being potentially affected. The suspicions are leading to a de-rating of the sector (higher risk premium and more demanding valuation multiples). This is more pronounced in lenders with greater exposure to wholesale banking. The sector has accumulated a decline of 43.2% in 2020 (vs a 14.2% fall in the EuroStoxx 600).