BBVA plans to buy back around 10% of its shares, currently worth about 2.6 billion euros ($3.2 billion), after the sale of its U.S. unit, the Spanish bank said on Friday.
The lender also said it planned to a pay a gross cash dividend of 0.059 euros per share on 2020 profits and return to its policy of distributing 35-40% of profits to shareholders in 2021, in line with European Central Bank (ECB) guidance.
The ECB gave recommendations on dividends and share buybacks in December, seeking to ensure banks have the resources to cope with a tough economic backdrop.
BBVA said its planned buyback and dividend policy were both subject to market conditions and regulatory approvals.
The bank said the sale of its U.S. unit, expected to complete in mid-2021, would put its pro-forma fully loaded core-tier capital ratio, the strictest measure of solvency, at 14.58% at the end of December 2020.
The reported capital ratio increased in the quarter by 21 basis points to 11.73%, prompting the lender to increase its capital ratio target to 11.5%-12% from 10.84%-11.34% previously.
In November, Spain’s second-biggest bank announced the sale of its U.S. business for $11.6 billion to PNC, signalling it could use part of the proceeds on a sizeable share buyback and dividend payments.
After it called off merger plans with smaller rival Sabadell that same month, the market was expecting an update on its capital plans.
BBVA also announced a net profit of 1.32 billion euros in the fourth quarter from a loss in the same period in 2019 thanks to lower impairments and one-off gains from the sale of part of its insurance business.
However, full-year net profit fell 63% due to provisions to cover the economic fallout from the coronavirus pandemic, including a 2.08 billion euro goodwill adjustment in the United States in the first quarter.
Banks across Europe are under pressure from rising bad debts and record low interest rates. On Friday, Spain’s Caixabank reported a 19% decline in 2020 net profit due to higher loan loss provisions.
$1 = 0.8264 euros
Reporting by Jesus Aguado. Additional reporting by Inti Landauro and Emma Pinedo. Editing by Mark Potter