(Bloomberg) -- European banks are pledging higher shareholder payouts as potential mergers put a focus on their market valuations and ability to boost returns.
Days after UniCredit SpA disclosed a 21% stake in Commerzbank AG, the German lender said it will boost the share of profit it pays out to more than 90% for the years 2025 to 2027. Meanwhile BBVA SA announced its highest-ever interim dividend on Thursday to help win over investors for its plan to acquire a smaller Spanish rival.
After riding an earnings wave from higher interest rates, Europe’s top banks were already on course to return a record €50 billion ($55.8 billion) via shareholder dividends and stock buybacks this year. Announced and potential deals are now giving lenders another reason to look to boost their share prices ahead of any talks or to ward off unwanted offers.
Bettina Orlopp, Commerzbank’s designated chief executive officer, said on Thursday that the lender’s payout policy was “a very, very good deal.”
“We think there is lots of upside potential to our share price development also in our current base case,” she said.
Banco Bilbao Vizcaya Argentaria SA, as the Spanish bank is officially known, has been immersed in a fight to acquire Banco Sabadell SA since April, with prospective dividends playing a central role.
While BBVA has said Sabadell’s payout pledges overstate its ability to generate excess cash in the long run, the smaller firm has since set even more ambitious goals.
On Wednesday, BBVA CEO Onur Genc cited analysts’ higher expectations for profits at his company as proof that Sabadell investors stand to see dividends rise in a deal.
“We do think it’s extraordinarily attractive for Sabadell,” he said at an investor conference. “We do think it’s a good deal for our shareholders.”
At the conference, Sabadell chief executive Cesar Gonzalez-Bueno countered that there is a “potential improvement” to its payout plans, which are “unmatchable” for BBVA.
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