Banco Sabadell raises dividend by 21% amid takeover bid after profit soars to €791m through June

When the bank’s board rejected an initial friendly takeover offer for the Basque company, it told the market it would pay out 2.4 billion euros in dividends over the next two years. The company has now revised that estimate to increase its payout to shareholders. 21% to 2.9 billion by 2025.

“The board of directors has approved the distribution of 60% of the current year’s profits, respecting its policy of distribution between 40% and 60% of profits (payments),” the Catalan bank said. In October of this year, the company will pay in cash the first dividend of eight euro cents per share for a total of 429 million euros, representing 15% of the total amount distributed over two years. “This interim dividend for 2024 alone will be 33% higher than the sum of the two dividends paid during 2023,” the company said.

In total, Sabadell estimates that it will distribute a total of 53 cents per share over these two years, equivalent to 27% of its market capitalization. This increase is explained by the amount of 250 million euros due to the reduced impact of the Basel IV rules following the final publication in June of the updated rules that will apply, as well as 250 million euros from the buyback program, which was suspended following the takeover bid from BBVA.

Dividends are one of the main ways for the bank to counter the Basque company’s offer, since for now it remains obliged to remain passive so as not to hinder the process; At the start of the decision-making period, the board of directors will have to publish a report on the takeover offer. Likewise, it seeks to show the market through its results that it has greater potential alone than together with others. BBVAas he emphasized when rejecting the initial friendly offer.

In this sense, profits up to June were record “as a result of strong business growth, particularly in SME and corporate finance and mortgage lending, as well as a continuous improvement in the credit risk profile, which allowed “to once again improve asset quality and reduce provisions.”

The company reported an improvement in profitability measured in Rote to 13.1% at the end of June, which implies an improvement of 395 basis points year-on-year and which compares with 12.2% in the previous quarter and 11.5% at the end of 2023. Likewise, the CET1 capital adequacy ratio, which measures the solvency of the company, rose to 13.48%, which represents an increase of 18 basis points in the quarter and 27 compared to the end of 2023; it is worth remembering the bank’s obligation to distribute any excess capital above 13% to shareholders.

CEO, Cesar Gonzalez-Buenohighlighted the progress of the Catalan company and sent a message in response to the takeover offer of BBVA. “Banco Sabadell’s strategy is paying off. We are a stronger and more efficient organization, with a solid financial and operational foundation, focused on accelerating growth and profitability. Looking ahead, we are confident that we have a bright future with greater value as we continue to independently implement our strategy,” he said in a statement, adding that “the gradual improvement we expect in our results, as well as the increase in size and market share in all segments, especially in SMEs, is proof of our exciting growth trajectory.”

Improving Margins

Details on the half-year results interest margin grew by 9.8%, slightly below double digits, to €2,493 million, “thanks to an increase in customer margin (3.18%), while commissions amounted to €674 million, down 3.3% year-on-year, within the expected range. It regular margin

(interest margin plus fees minus expenses), meanwhile, rose 11% year-on-year to 1.652 million, while the efficiency ratio improved 3.8 percentage points to 48.3%.

The non-performing loan ratio in June was 3.21%, down from 3.46% in the previous quarter, meaning it remains at a level in line with that seen in the rest of the Spanish financial sector.

One of the least friendly faces of the half-year results can be found in Great Britain“TSB ended the second quarter of 2024 with a net profit of 41 million pounds, up 9.1% quarter-on-quarter, and 79 million pounds in the January-June period, down 24.9%. The positive contribution to the Banco Sabadell group’s accounts was 49 million euros in the second quarter and 95 million euros in the first half, half of which was contributed by the group for the entire previous year,” the organization said. However, this 95 million represents a decrease compared to the 106 million recorded last year at the same time.