European banks are set to significantly increase dividend payments this year, spurred by stronger profits, with Danske Bank A/S, HSBC Holdings PLC, Commerzbank AG and Intesa Sanpaolo SpA poised for the sharpest hikes.

The continent's largest publicly traded banks are expected to raise dividends paid out on 2023 profits by 43%, on average, compared to 2022, data from Dividend Forecasting, a division of S&P Global Market Intelligence, shows.

UK-based HSBC, Germany's Commerzbank and Italy-based Intesa are set to pay out 153%, 110% and 70% more, respectively, while Denmark-based Danske Bank will resume dividends after paying nothing last year.

Strong revenues, bolstered by rising interest rates, have provided banks with more profits to return to shareholders. Most big European banks are forecast to record higher net interest income (NII) — the difference between interest earned on loans and that paid to depositors — in 2023, with many expecting further upside in 2024.

Moreover, recent EU-wide stress tests indicate that lenders are resilient enough to stick to dividend and buyback targets, and even increase payouts, analysts previously told Market Intelligence.

Danske Bank announced an interim dividend of 7 Danish kroner per share in July, which represented about 59% of earnings for the first six months. It is set to pay a total dividend of 14 Danish kroner for full year 2023, according to Dividend Forecasting.

Danske resolved a long-running money laundering case in late 2022, removing uncertainty about the size of a fine and clearing the way to higher shareholder returns. The bank paid about 15 billion Danish kroner to US and Danish authorities to settle the investigations, which related to suspicious money moving through its Estonia branch between 2007 and 2015.

– Access dividend details for Dankse Bank, HSBC, Commerzbank and Intesa Sanpaolo on CapIQPro. – Access the Peer Analysis template on S&P Capital IQ Pro. – Access the EBA stress test template.

HSBC's 2023 dividend payout is expected to rise to $0.81 from $0.32 in 2022. It announced its latest interim dividend of $0.10 when reporting second-quarter earnings on Aug. 1.

The bank is targeting a payout ratio — the proportion of earnings that is paid out as dividends — of 50%, CFO Georges Elhedery said. It can sustain dividends in the future due to balance sheet growth offsetting any decline in NII, cost discipline and fee income growth derived from investment in areas such as wealth management, which would mitigate any turn in the bank's earnings, he said.

Commerzbank, which in August upgraded its NII guidance for the year, is expected to increase its 2023 dividend to 42 euro cents from 20 euro cents. Its planned payout ratio for 2023 is 50%.

Intesa, which generated the largest quarterly increase of NII among big European banks during the second quarter, is expected to boost its 2023 dividend to 28 euro cents from 16 euro cents. The bank was committed to a 70% payout ratio, CEO Carlo Messina said during a July 28 earnings call.

If the bank continues generating strong income and excess capital, it should achieve a dividend yield of 11%, which Messina said is the highest among European banks. The dividend yield measures how much income a shareholder would earn in dividends per year for each euro invested in the bank's stock.

Of the 25 banks in the sample, only NatWest Group PLC, by 43%, and Credit Agricole SA, by 24%, are set to reduce dividend payments on 2023 profits.