If it is necessary to put forward a great ally of the banking entities, to try to continue to win points to attract investors, it is the dividend yield. For the next financial year, National banks will offer on average a dividend of almost 8%According to FactSet data, Banco Sabadell will already be at the top of this ranking, with a yield of 9%, surpassing for the first time CaixaBank, which previously occupied this first position, and with which it positions itself as the company with the yield the highest of the entire Ibex 35.
Being the bank with the most profitable dividend is not peccadillo, since this throne is one of the great claims of the sector in recent years. Looking back at this recent history of leading positions, BBVA, since selling its position in the United States, was for a while the undisputed leader in this sense, until CaixaBank ousted the Basque entity in 2023, when the context that was happening in the market was the increase in interest rates. Since then, the company now chaired by Tomás Muniesa (who succeeds José Ignacio Goirigolzarri, although his presidency will be non-executive) occupies this position of bank with the highest shareholder remuneration, but the roles have been reversed again.
In the heat of a takeover bid that continues to get complicated and extend over time, Banco Sabadell will be first in 2025 for shareholder remuneration. Since BBVA launched the purchase offer to Sabadell shareholders last May, the two entities have been playing the macro-dividend card to convince investors of their position. The operation, as it progresses, continues to drag on, and the CNMC announced a few days ago that the first phase of the study is not sufficient, as on other occasions, and considers it necessary to move on to phase II, in an analysis that will last until 2025. Experts believe that this process reduces the chances of success of the operation.
With BBVA’s offer already launched, Sabadell revealed that its strategic plan committed 2.4 billion to remunerate shareholders, via dividends and share buybacks. In June he raised this figure to 2.9 billion and, although he has not yet increased it because any payment must be approved by the board of directors, González-Bueno has led the way in this direction in the presentation of the results, ensuring that this figure is a “floor”. Sabadell had to freeze the share buyback that it had already launched after the launch of the public takeover offer. In exchange, the entity increases the payout (the percentage of profit allocated to the dividend) to 60%, which is the upper end of the range (40-60%). Thus, with expenses for the years 2024-2025, the entity plans to remunerate its shareholders for a total of 2,900 million euros, equivalent to 53 euro cents per share, or around 28% above the current price.
Here war that the two entities continue to strive to convince shareholders, BBVA, for its part, assured a few weeks ago that “does not intend to modify the current dividend policy” of the Catalan entity, whatever stake she acquires If the merger does not take place, and assured that it “intends to maintain its own dividend policy once the exchange offer is finalized”, even if it manages to integrate it despite the veto announced by the Government.
The dividend yield surprise will continue after 2025, according to consensus estimates (see chart). In 2026, BBVA would again be at the top of this ranking, with a yield of 8.1% (in a year where, in general, yields will be lower, and only Santander and BBVA will be able to increase them). In 2027, a further rebound is expected in this area, with CaixaBank and Banco Santander on the throne, with yields of 9.6%.
“The dividend yield of Spanish banks appears to be one of the great attractions for investors in 2025reaffirming its relevance within the stock market. With an average yield that reaches 8%, Spanish banks demonstrate their commitment to their shareholders through high dividends, especially in a context where other sectors tend to be more cautious in terms of capital return,” explains Gustavo Martínez , professor of finance at the Francisco Marroquín University and market analyst.
The expert specifies that at a time when the banking sector is facing challenges such as digitalization, regulatory pressure and market volatility, “such attractive profitability can be considered a sign of strength.” However, Martínez clarifies that many companies and sectors have used the high dividend policy “to attract equity disguise poor future operating cash flows. » And remember that The most important thing is not the dividend, but the company’s ability to generate future cash flow.
Adrián Hostaled, analyst of more aggressive rates which help to compensate for the decline in economic growth on the Old Continent due to the protectionist policies of Donald Trump. With the decline in remuneration offered in banking products and deposits, investors could be attracted to the market. high dividend yield offered by the Ibex 35 banking sector”, he emphasizes.
Hostaled highlights the atypical factor observed in the performance of the banking sector in 2024. “Caixabank, the second company that gives the highest performance in terms of price per share during the year, 50%, which places it just behind Sabadell , is precisely that.” which currently yields the most dividends (9%). We can conclude that the Spanish banking sector sought to take advantage of a year that it knew from the start would be good in terms of the stock market, combining it with a high reward for its shareholders, increasing the dividend to 8-9%.
The XTB analyst completes by saying that Unicaja, Bankinter and Santander are also a mirror of what has been mentioned, since they are placed in the top 10 of the companies with the highest performances so far in the Ibex 35 in 2024, “at the same time as they took advantage of the opportunity to increase their dividend and thus attract the greatest number of shareholders and the largest possible volume of capitalization.
Almost 60% off
The sharp rises recorded in the stock market are accompanied by a sharp rise in their profit estimates, after setting all-time highs on different occasions. It is for this reason that the PER (the time when profit is included in the share price) of banking entities continues to be another of their great demands. For 2025, all will be listed for a multiplier less than 8 times. Banco Santander is the cheapest in this sense, with a 5.6x multiplier for next year, according to FactSet consensus estimates.
In fact, compared to their own historical averages, the average discount offered by Spanish entities is 58% (compared to the average of the last 24 years) and 57% compared to the decade average. All companies are trading at a discount of more than 40% compared to its multipliers of the decade, and CaixaBank is the one experiencing the greatest reduction, with a PER of 7.7 times by 2025 compared to the 22.7 times its profits were purchased on average over the last ten years.
And the fact is that after months of prosperity, with the start of rate cuts in the Eurozone, the traditional banking sector began to deflate after two years of automatic growth under the effect of higher margins on loans loaned. However, interest rates, which remain high despite the latest cuts, allow the sector to also record historically high profits.
In the case of the Spanish banking sector, in 2024 the common net profit will be higher than that of 2023, reaching 30,000 million eurosaccording to the analyst consensus collected by FactSet, 14% more than what was reported last year among the six national entities. However, by 2025 this figure will not be higher, since the consensus expects these gains to contract by around 5%, after the historic ceiling they will reach in 2024.
Three purchase recommendations
Despite the revaluations on the stock market, experts still see opportunities within this segment and there are three companies with the best possible recommendation (buy), according to the algorithm used by this media with FactSet. These are Sabadell, Santander and CaixaBank. The other three Ibex 35s (BBVA, Unicaja and Bankinter) have a recommendation to hold their securities.
Regarding the book value of the Spanish entities, one of them is currently trading above it and another above its price/book value, and both are expected to continue to do so in 2025. one of them is Bankinter, which is the only one among the Large Spanish banks, which historically do not quote with such a discount, is one of them. NOW, its share price not only reaches the value of its assets, but exceeds it, with a price/book value ratio of 1.1 times. CaixaBank stock trades at 1x book value. The entity managed to exceed its book value on the stock market last March for the first time in 2018.
Concerning the upside potential, Ibex Banks currently proposes a trajectory of 21% until reaching its price objective, according to the consensus of the experts collected. Bloomberg. During the year, the index beats the selective index which includes the most representative banks of the Old Continent, the Stoxx 600 Banks, which recorded an increase of 23% and constitutes the most bullish segment of the index during the year.
