To return excess cash to shareholders, companies can choose between share buybacks (SBB – where the company repurchases its own shares at the market value) and dividend pay-outs. While SBBs are generally more common in the US, where dividends can attract higher taxation rates, there are a growing number of European companies performing SBBs.
In the absence of a league table for share buybacks in Europe, BNP Paribas has compiled the first database of its kind on SBBs, providing useful benchmarks for listed companies when they consider their capital allocation strategy and/or their shareholder return policy. The database was built using a bottom-up approach, focusing on executed SBBs published by companies on their websites as part of their MAR regulatory reporting obligations.
In the latest edition of ‘Buyback to the Future’, BNP Paribas reviewed the SBBs executed in H1 2022 by 320 Large Cap companies in Continental Europe and the UK, including the national indices of France (CAC 40 and CAC NEXT 20), UK (FTSE 100), the Netherlands (AEX), Germany (DAX), Italy (FTSE MIB), Spain (IBEX) and Belgium (BEL 20).
Here are some of the key findings:
| Within the sample of 320 European & UK Large Caps, H1 2022 is characterised by a very strong SBB activity both in terms of the number of active companies (133; +49% vs H1 2021) and the nominal amount executed (EUR 70bn; x3.2 vs H1 2021) | Against all expectations and despite the uncertainties linked to the conflict in Ukraine, monetary policies and inflation, the SBB market has more than tripled in size between H1 2021 (EUR 22bn) and H1 2022 (EUR 70bn). |
| The size of the SBB market in Europe and the UK in relative terms (% market cap) is approaching that of the US: The EUR 70bn SBB represent 0.86% of the total market cap in H1 2022, compared with 0.25% in H1 2021 (vs 1.04% in the S&P500 in H1 2021). | The weighted index performance of companies that executed a SBB in H1 2022 outperformed the market by 4.8% with notable differences between local indexes. |
If you’re interested to learn more about the report, contact the Corporate Cash Equity team at corporate.equity@exanebnpparibas.com.
