Iberian Banks: Squaring up growth and distributions - a closer view of capital generation and allocation

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Iberian Banks: Squaring up growth and distributions - a closer view of capital generation and allocation

Global Research

16 June 2026ab

Iberian Banks Equities

Europe including UKSquaring up growth and distributions - a closer

view of capital generation and allocation Banks, Ex-S&L

Ignacio Cerezo

Analyst

ignacio.cerezo@ubs.com

Squaring up growth and distribution - what is the market rewarding? +44-20-7568 4409

Alongside the rest of the sector, Iberian banks have seen a large improvement in capital Alvaro Fernandez-Garayzabal

generation, and extensively distribution, post pandemic; and we expect a high degree of Analyst

recurrence of this trend over the next 2-3 years as incremental earnings support alvaro.fernandez-garayzabal@ubs.com

outpaces higher volume-driven RWA growth, and given no bank in our coverage needs +34-91-436 9622

to replenish solvency ratios. Against that general trend, as highlighted in Figs 2-9,

plotting banks' KPIs with PE multiples suggests larger gaps in terms of how the market

seems to be valuing banks' capital generation and allocation prospects. On one hand,

we see CABK, and to a lesser extent UNI, getting most benefit of the doubt, with the

former looking more understandable insofar it has seen positive EPS revisions and ranks

strongly on all key areas (EPS growth, capital generation, ROTE); and the latter more

questionable, given a structural shortfall in growth/ROTE terms. On the other, having

recently "full" ex-TSB dividend (c15% of market cap), SAB's fundamental outlook is not

particularly exciting in absolute terms, but appears conservatively valued vs domestic

peers. Scoring well on key earnings/capital generation metrics, the analysis underpins

our Buy ratings on SAN and BCP, both also trading at relatively undemanding multiples.