Last month, the Fed block plans for higher dividends and increased share repurchase programs by the U.S. units of HSBC (NYSE: HBC), RBS (NYSE: RBS) and Santander (NYSE: SAN), citing weakness in the capital plans of those banks. HSBC and Santander are EUFN’s two largest holdings, combing for 15% of the fund’s weight. [Bad News for Citi Could Hinder These ETFs]
The ECB said banks will have six to nine months to address any capital shortfalls revealed by the stress tests, Bloomberg reported.
Europe’s stress tests, like their U.S. equivalents, could prove pivotal to the efforts of EUFN holdings to return capital to shareholders. Although the ETF has a trailing 12-month yield of just 1.57%, it was expected payouts by European banks, led by French and Swiss firms, would drive dividend growth in Europe this year. France and Switzerland combine for almost 23% of EUFN’s weight. [Sector Approach to Europe ETFs]
iShares MSCI Europe Financials ETF