European banks allocate $5 billion for buybacks due to rate hikes

Spanish lender Banco Bilbao Vizcaya Argentaria SA has unveiled a program of up to €1bn, with Standard Chartered Plc leading the UK with a $1bn buyout.

A wave of investor payouts from seven lenders across the region came as rising lending revenue boosted banks' profitability. It was another sign of how much the European Central Bank and the fast growth cycle of the Bank of England have supported the sector.

For example, UniCredit SpA's net interest income grew by 42% in the first half and by 39% at BBVA.

In the UK, at least, the buyback bonanza hasn't helped assuage investors' fears that rising profits from betting are fading. Barclays Plc and NatWest Group Plc have lowered their forecasts for how much more they earn on loans than they pay on deposits, ie net interest margin.

“Customers are looking for high returns on their savings and we have changed our prices in response,” Anna Cross, chief financial officer of Barclays, said Thursday.

Barclays shares fell 6.7% on the news.

The results "showed us that the market will not let you pay for a lower net interest margin with a higher-than-expected buyback," RBC analyst Benjamin Thoms said Friday.

Continental European banks said the prices they pay for deposits continue to rise at a slower pace than previously thought.