LIVE MARKETS-Europe's bank buyback boost fading - UBS

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EUROPE'S BANK BUYBACK BOOST FADING - UBS

Support for the banking sector from buybacks has started to fade since their post-Covid spike, according to UBS analysts, who found significant variation between banks when it comes to how many shares they've bought back.

The likes of NatWest, Unicredit, StanChart, ING and AIB have all cut shares outstanding by over a fifth. Meanwhile eight lenders have actually grown shares in issue.

UBS points out that while returns on tangible equity (ROTEs) are high and rising across the sector, lower implied cost of equity and reduced stocks of excess capital versus management targets have seen the buyback yield shrink to just 2.3% in 2026.

This is making M&A a more realistic strategic alternative now, says UBS.

Even so the bank expects buyback announcements from a large number of banks along with fourth-quarter results.

"One question is whether the acceleration in repurchases we assume in FY27 - the mathematical result of growing forecast profits - to a 2.6% buyback yield on a market cap weighted basis - is likely to be diverted into bank-improving, value-creating corporate activity instead," they add.

(Lucy Raitano)

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