European banks promise 120 billion euros in profit

European banks plan to return more than 120 billion euros to shareholders in 2023, passing on the benefits of rising interest rates to investors.

About this informs Financial Times.

Europe’s biggest listed banks pledged to pay out 74 billion euros in dividends and buy back 47 billion euros in shares, up 54% from the previous year and far more than any year since at least 2007, according to UBS data. .

Buybacks have been the biggest source of growth over the past three years, at just a few billion euros a year at the top 50 banks in the years to 2020.

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Since then, European banks have used their profits from soaring interest rates to buy back shares at discounted prices.

However, investors were cautious about the return of capital. According to Antonio Roman, portfolio manager of the Axiom European Banks equity fund, banks need high and stable profitability.

“Over the past two years, European lenders have received 100 billion euros thanks to the difference between the interest they pay on deposits and receive on loans, known as net interest income,” the report said.

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Among the most eye-catching payout announcements this year is Italy’s UniCredit, which has pledged to pay investors €8.6bn – its entire 2023 profit. Barclays pledged to return £10bn to shareholders over the next three years, while Standard Chartered said it would return $5bn over the same period.

However, analysts warn that shareholder returns will begin to fall as early as next year as central banks cut interest rates and lenders are forced to look for other sources of income.

We will remind:

European Central Bank (ECB) experienced reported its first annual loss in nearly two decades as interest rates rose in response to a surge in EU inflation.