BBVA says Sabadell’s 2.9 billion dividend does not generate value for shareholders

September 23 () –

BBVA believes that the remuneration of 2.9 billion euros over the next two years that Banco Sabadell plans to pay does not represent a creation of value for shareholders, but is rather neutral for them.

“The announcement of a dividend payment in the short term does not generate more value for the shareholder, it simply means distributing something that already belongs to them,” said BBVA’s global head of Strategy and M&A, Victoria del Castillo, in an interview with the newspaper ‘El Independiente’, assuring that, in terms of total return, the dividend payment “is neutral.”

“What really matters is the ability to generate profit in the future, which will determine the ability to pay dividends in the future, in a sustainable way,” said the head of Strategy at the bank.

Del Castillo argues that the merger operation proposed by BBVA will lead to a 30% increase in earnings per share for Sabadell shareholders. This will be accompanied by savings of 850 million euros per year in synergies. “And a higher profit will lead, in a sustainable way, to a higher dividend. This is value creation,” he stressed.

Banco Sabadell’s commitment for this year and the next is to remunerate shareholders with 2.9 billion euros. However, this figure could be higher because when the bank made this commitment, it did not include the improvement in the return on equity (RoE) target, which has risen to 13%, compared to the previous 12%.

In fact, last July, in an interview with Europa Press, Banco Sabadell CEO César González-Bueno opened the door to distributing extraordinary dividends to distribute the excess capital generated by the bank.

“We will distribute whatever is above 13% [del capital CET1] “If the board approves it, there is no limitation. There is no restriction that the maximum we can distribute is 60% of the profits for the year,” explained the CEO.

The new remuneration distribution target was set in July of this year and meant increasing by 500 million euros the distribution of 2.4 billion that had been suggested in May, as an argument for rejecting the BBVA takeover bid. Sabadell explained that this additional distribution of 500 million was due to a lower impact of Basel IV and the distribution of the buyback program that was suspended by the takeover bid.