Thursday, December 2

BBVA raises pay out to 40-50% and boosts profitability


BBVA modified its shareholder remuneration policy with a new pay-out of between 40 percent and 50 percent. This is the part of the ordinary profit that goes to the dividend. In addition, the entity improved its profitability objective to 14 percent.

After selling its division in the United States, the bank focused on digitizing the business and emerging markets, such as Mexico and Turkey. Part of the excess capital was used to launch a takeover bid for all of Garanti, the Turkish subsidiary. And with another party, he launched a share buyback program for 10 percent of the capital.

The bank’s price reacted with sharp falls to the news of Garanti. Investors did not understand the bet for a politically unstable market and with a currency marking successive historical lows.

BBVA promotes the distribution of dividends

BBVA’s new pay out target exceeds the 35-40 percent range that was established in February 2017. The entity has reported through the National Stock Market Commission that the policy will be implemented “by distributing an amount on account of the dividend for the year (which would foreseeably be paid in October of each year)”.

In addition, a complementary dividend which will be paid “once the financial year is over and the application of the result has been approved, foreseeably in the month of April of each financial year”.

The bank chaired by Carlos Torres Vila points out that cash distributions may be combined with share buybacks, “all subject to the corresponding authorizations and approvals that are applicable at all times,” the group clarifies in a statement sent to the supervisor.

14 percent profitability beating forecasts

The announcement occurs on the occasion of the presentation of the new Strategic plan of the entity setting the date of completion of the same in 2024.

Under the new plan, BBVA expects to raise the return on tangible capital (ROTE) to 14 percent by 2024. This metric closed the first nine months of the year at 11.7 percent. The bank expects to add ten million customers during the effective date of the plan.

The objective of the entity chaired by Carlos Torres Vila is higher than the estimates that the market consensus used and that placed the ROTE rate in a range between 10 percent and 12 percent.

No change in solvency

Regarding the efficiency ratio, BBVA expects to reach 42 percent, from the 44.7 percent in which it closed September, and estimates that it will raise the tangible book value per share plus dividends by 9 percent until 2024 in annual rate composite.

Instead, has not made any changes to the CET1 “fully loaded” capital ratio, the most followed by the market to know the solvency of a financial institution.

Thus, it reaffirms the range from 11.5 percent to 12 percent, despite the fact that closed September well above said level, at 14.48 percent.

10 million new customers

Other objectives announced by the bank add 10 million more customers by 2024. In this sense, Torres Vila has indicated that the bank is “in a unique position to capture the growth opportunities that this era of unprecedented changes offers us”

It also left its green financing target of € 200 billion unchanged until 2025. However, the CEO, Onur Gencsaid that BBVA “has one of the highest levels of ambition in European banking. We are going to be a bigger and more profitable bank, with a unique value offer, consolidating our leadership in efficiency”.



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