FTSE 100 buybacks set to hit record figure this year

Wael Sawanm the new boss of Shell 
(Corporate Reporting_Board and EC Photography 2021, NL)
Wael Sawanm the new boss of Shell (Corporate Reporting_Board and EC Photography 2021, NL)

FTSE 100 companies are due to have another record year for share buybacks, having already spent £55bn this year, according to new figures from AJ Bell.

The £55bn spent so far this year is more than double the £21.3bn spent in 2021 and triple the £17bn averaged over the 2010s.

Shell tops the buyback list, according to AJ Bell, followed closely by competitor BP. The energy giants have bought back £13.6bn and £6.3bn, respectively, so far this year.

Banks have also embraced the buyback this year. HSBC and Natwest have bought back £5.6bn and £2.6bn in shares, respectively, this year.

Buybacks divide opinion. On the one hand, they are a way for a company to return cash to shareholders in a less binding way than a dividend increase. However, they are also criticised for artificially propping up a company’s earnings per share.

Gervais Williams, head of equities at investment group Premier Miton, told The Times that companies would instead benefit from using their excess cash to pay down debt or saving it for a rainy day.

He pointed to the cautionary tale of Direct Line which was forced to abandon its buyback and scrap its dividend earlier this year amid a major profit warning.

“If anything, when I see my companies, I say, ‘please don’t buy back any shares’,” he told The Times.

Meanwhile, Charles Hall, head of research at broker Peel Hunt, argued that boosting share prices through buybacks was “good news for everyone” as many people have parts of their pensions invested in the stock market.