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Santander to return half of profits to shareholders in 3-year strategy

© Reuters. FILE PHOTO: A Santander company logo is pictured at the company’s headquarters in Boadilla del Monte, outside Madrid, Spain, February 2, 2023. REUTERS/Violeta Santos Moura

By Jesús Aguado

MADRID (Reuters) -Spain’s Santander (BME:) plans to return half of its profits to shareholders over the next three years in the form of cash payouts and share buybacks, it said on Tuesday as it lifted its mid-term financial targets.

Announcing a new three-year strategy, Santander assured investors that increased revenue driven by customer growth and higher interest rates in some of its core markets in Europe and South America would be enough to deliver on the targets.

Santander has been relying in the past on Latin America to cope with tough conditions for lenders in Europe since the financial crisis but banks across Europe are beginning to benefit from higher borrowing costs despite economic uncertainty and fears of recession.

The euro zone’s second-biggest lender in terms of market value said it aimed to achieve a return on tangible equity (ROTE) of 15-17% over the period from underlying profit of 13.37%.

The new dividend pay-out policy of 50% of consolidated attributable profit for the period 2023-2025 – excluding non-cash, non-capital ratios impact items compared to 40% currently.

“Profitability guidance will be a positive surprise for the market … however the company had already guided to an above 15% ROTE in 2023,” Jefferies said, adding that new dividend policy had also been anticipated.

As part of this plan, Santander’s European region will see this metric rising to 15% from 9.28% by the end of 2022.

The lender said it also aimed to maintain its core tier-1 fully loaded capital ratio, the strictest measure of solvency, above 12% throughout the three years.

At 0856 GMT, shares in Santander were up 1.5%, while Spain’s leading blue-chip index was up 0.3%

The bank expects to raise its global customer base by 40 million to around 200 million, helping it to grow revenue by around 7-8% per year on average in constant euros in the period.

Santander also said that it expected to improve its efficiency ratio to 42% from currently 45.8%.

Its total cash dividend per share for 2022 will rise to 0.1178 euros, it said, also announcing an additional share buy-back programme of 921 million euros ($974.8 million) after obtaining regulatory authorization.

($1 = 0.9448 euros)


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