Spanish banking giant Santander has announced a new share buyback programme worth €1.5 billion, fulfilling its promise to boost investor payouts.

The programme, set to conclude by 3 January 2025, represents approximately a quarter of the bank's underlying profit for the first half of 2024.

This latest buyback follows a similar €1.5 billion programme announced in February, when Santander increased its target payout ratio to about 50 per cent of underlying profit, up from 40 per cent previously. The move comes as Santander continues to benefit from the European Central Bank's interest rate hikes, despite recent rate cuts.

Ana Botín, executive chair of Santander, said, "This buyback programme demonstrates our commitment to delivering value to our shareholders while maintaining a strong capital position."

The bank reported a record underlying profit of €6.06 billion for the first six months of 2024, with analysts projecting full-year net income to exceed €12 billion. The new buyback programme is expected to represent about 2.14 per cent of Santander's share capital.

Investors responded positively to the news, with Santander's shares rising 2.1 per cent in early trading in Madrid, outperforming other European bank stocks.

José Antonio Álvarez, chief executive officer of Santander, added: "Our strong performance allows us to maintain our shareholder remuneration policy while continuing to invest in our business and support our customers."

The bank's distribution policy is split roughly equally between cash dividends and share buybacks. Santander's board is set to decide on the interim dividend cash payout against 2024 results on 24 September.

As the eurozone's second-largest lender by market value, Santander's move reflects the broader trend of European banks increasing shareholder returns amid a favourable interest rate environment. However, the sustainability of such generous payouts may be tested as the ECB's monetary policy stance evolves.

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