The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

Share buy-backs highlight low corporate confidence

It’s good news for bondholders and shareholders that companies are awash with cash: it’s bad news for everyone that they can find nothing better to do with it than buy back their own shares.

A feature of the third-quarter earnings season in Europe was the number of large corporations reinstating share repurchase programmes. Vodafone and Diageo were prominent examples while Groupe Danone announced new plans to divert surplus cash to buying in stock and BHP Billiton announced a share buy-back on withdrawing its bid for Potash Corp. Tracking this trend, Morgan Stanley notes a doubling in 2010 of the number of companies buying back shares and the volume of transactions compared with 2009. The firm also points out that companies have a lot of firepower to put behind these repurchases. Cash has become a big portion of the corporate assets of the EuroStoxx 600 companies, accounting for 7.5% of total assets.

With profit margins back to 2005 and 2006 levels, corporations look to be in robust health. It’s just a shame they remain so reluctant to invest.

Europe is simply catching up with the US. Moody’s has calculated that cost-cutting in the recession of 2008 and subsequent resurgent earnings even in a moderate recovery since 2009 have helped US non-financial corporations build a cash hoard of nearly $1 trillion. That equates to 28% of their total outstanding debt and far exceeds their present plans for capital expenditure or dividend payouts.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree