In an effort to snatch more investor attention, Spain's second-biggest lender, Banco Bilbao Vizcaya Argentaria SA said on Friday that it plans to raise the dividend. The strategic move comes at a time when BBVA is racing along with Banco de Sabadell SA to lure investors with improved commitments towards paying out the dividends.
On Tuesday, BBVA announced a 33% increase in its interim dividend to 0.16 euros ($0.17) a share. That is proof of the bank's health and its commitment to shareholder returns. In a presentation, BBVA Chief Executive Onur Genc had said that this raise shows the strong capital position of the bank and its efforts to distribute excess capital among the shareholders.
That pits BBVA directly against Sabadell, which last week also announced its ambition to raise shareholder returns. Sabadell had unveiled an ambitious target to distribute 40% to 50% of its profits via dividends and share buybacks until 2024. BBVA's new dividend policy signals its determination not just to match but possibly outdo its rival.
This decision to raise dividends comes after BBVA posted a sharp increase in second-quarter net profit, reflecting robust profitability. The net income at the bank jumped 10.2% from a year earlier to 1.8 billion euros ($2.1 billion) due to effective cost management and higher lending margins.
In addition, BBVA announced its desire to further repurchase more shares well into the future. This is an indication of the bank's confidence in its stability and a signal that it wants to continue giving value to its investors. Already, the buyback program has seen the repurchasing of some shares valued at 1.7 billion euros since the beginning of the program, while the newly rolled out strategy stipulates further extensions.
Market analysts welcomed the announcements, with the increased dividend and extended buyback program seen as good signals of the health and strategic soundness of the institution. Its shares surged notably in a reflection of investor approval after the announcement.
Acabas proactivas de BBVA tambin reflejan una tendencia ms amplia por parte de los bancos europeos, muchos de los cuales están prestando más atención a los rendimientos para los accionistas como medio para atraer la inversión en un entorno de baja tasa de interés con incertidumbre económica en varias frentes.
Investors will be quite eager to know how these new strategies pay off for BBVA, whether they will continue the competitive edge over Sabadell in quarters to come. Its execution will be crucial as to how this bank shapes its future market position and investor relations.
In short, BBVA will hike its dividend by 25% and extend its share buyback program-strong strategic focus on increasing shareholder value. With Sabadell hot on their heels, BBVA's latest moves are all set to send ripples in the financial markets.
For further updates on this developing financial tussle and what this means for Europe's banking system, please follow.
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Author: Victoria Adams
