Banks across Europe are poised to return more than €120bn to shareholders due to record profits driven by interest rate hikes. According to data compiled by UBS and reported by the Financial Times, the largest publicly traded European banks have committed to distributing €74bn in dividends and €47bn in share repurchases. This marks a 54 per cent increase in capital returns compared to the previous year, exceeding annual figures since 2007.
Italy’s UniCredit has committed to distributing its entire 2023 profit of €8.6bn to investors. Meanwhile, Barclays recently announced a plan to return £10bn to shareholders within the next three years and Standard Chartered pledged to return $5bn over the same period. Additionally, UBS intends to increase its dividend by 27 per cent to 70 cents per share in May, along with a share buyback of up to $1bn in 2024.
European banking executives are under pressure to improve their valuations and regain investor confidence amid concerns sparked by dividend bans and windfall taxes prevalent across the continent in recent years, wrote the FT. However, analysts have warned that the level of shareholder returns will start to decline next year, as central banks cut interest rates and lenders are forced to find other sources of revenue.
—
The Financial Action Task Force has removed the UAE from its so-called “grey list”, which identifies countries that have deficiencies in dealing with money laundering and terrorist financing. The Gulf country, which has emerged as an important global trading hub, was placed under closer scrutiny in 2022, when FATF highlighted increasing risks of money laundering and terrorist financing in connection with banks, precious metals, gemstones and property.
FATF said on Friday that the UAE will no longer undergo extra scrutiny by the organisation, as it has demonstrated a significant improvement in its capacity to monitor and control illicit money flows. However, as reported by the FT, the UAE’s removal from this list has also drawn criticism from some anti-corruption campaigners, who argue that FATF’s decision has come too soon and there should be sustained international pressure on the UAE to continue its reform efforts.
—
Chinese fintech giant Ant Group has reportedly outbid US-based Citadel Securities for Credit Suisse’s securities business in China. UBS put the business on sale after gaining control of Credit Suisse following its collapse last year. Since UBS already possesses a securities unit in mainland China, it cannot hold two licences.
Ant Group’s bid to establish a securities business in China by leveraging the infrastructure of Credit Suisse’s operations is expected to face increased regulatory scrutiny. Anonymous sources cited by Bloomberg have said that Beijing prefers a foreign buyer, since the licence was originally issued to an overseas company.
UBS must now weigh the higher local bid from Ant against the lower bid of around Rmb2bn ($278mn) from Citadel that was submitted in December. Citadel’s bid is deemed more likely to secure government approval, according to Bloomberg’s report.
—
South Korea’s Financial Services Commission has announced reform proposals aimed at bolstering shareholder returns, in an effort to emulate Japan’s success in elevating stock valuations through a corporate governance drive. Last week, Tokyo’s benchmark Nikkei 225 index surged beyond its all-time high set in 1989.
Its “Corporate Value-up Programme” aims to encourage and support companies in voluntarily increasing capital returns to shareholders while improving their governance practices, the FSC said.
As part of this initiative, the FSC is also considering the implementation of tax incentives, including preferential treatment in tax policies for companies that improve their market value and deliver increased shareholder returns.
The FSC said the reforms “could help resolve the problem of Korea discount”. The “Korea discount” refers to a trend for South Korean companies to carry lower valuations than their global counterparts, attributed to factors such as low dividend payouts and the dominance of opaque conglomerates known locally as chaebols.
Read more: South Korea’s banking liberalisation push shows limited success
