Steven Arons
Fri, July 28, 2023
(Bloomberg) -- Europe’s biggest banks announced new share buybacks worth $5 billion this week as they continue to benefit from higher interest rates.
Spanish lender Banco Bilbao Vizcaya Argentaria SA unveiled a program of as much as €1 billion ($1.1 billion), with Standard Chartered Plc leading in the UK with a $1 billion buyback.
The wave of investor payouts from seven lenders across the region came after surging lending income boosted the profitability of banks. It was another sign of how much the European Central Bank and the Bank of England’s rapid hiking cycle had bolstered the sector.
Net interest income at UniCredit SpA, for example, surged 42% in the first half and jumped 39% at BBVA.
In the UK, at least, the buyback bonanza did little to assuage investor concern that the profitability boost from rates is tapering off. Barclays Plc and NatWest Group Plc both downgraded their guidance for how much more they earn on loans than they pay on deposits, known as net interest margin.
“Customers are seeking high yields for their savings, and we have changed our pricing in response,” Barclays Finance Director Anna Cross said on an earnings call Thursday.
Barclays’ stock dropped as much as 6.7% on the news.
The results “showed us that the market will not let you pay for a NIM downgrade with a better-than-expected buyback,” RBC analyst Benjamin Toms said in a note Friday.
Banks in continental Europe said the prices they’re paying for deposits continue to rise at a slower pace than previously thought.
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