MNI BRIEF: Banks' Buyback Announcements Boost Shares 2.5% -ECB

The announcement of a share buyback by a commercial bank increased the share price by 2.5% relative to the EURO STOXX Banks Index in the five trading days following the announcement, the European Central Bank wrote in its latest blog.

According to the ECB, the report cites an event study approach based on a total EUR 61.6 billion from 75 buybacks between 2020 and by 2024 by 21 banks. The study also made a distinction between announcements made with the release of quarterly earning reports (43%) and those not. Even if the abnormal returns follow the same pattern, volatility is higher with stand-alone announcements, the study found.

This measure is called the “abnormal return” to ensure the study does not wrongly attribute changes affecting the share prices of the entire industry to an individual bank’s, the ECB said. More in detail, the effect of buyback announcement depends heavily on the bank’s price to book ratio

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