Santander is the second biggest bank of the Eurozone, and in my opinion, it's highly undervalued.
If you check the results of previous years, the EPS has been very constant, with some growthwith one exception:
Diluted Normalized EPS (deGiro)
2022 0,65
2021 0,58
2020 -0,11 !!!
2019 0,4
2018 0,47
2017 0,44
2016 0,41
Well, in 2020, they had 12.6b losses (equivalent to something like -0.6 EPS) for 10.1b doing an impairment on goodwill and 2.6b in deferred assets). So it means a non-cash accounting adjustment, that I'm convinced that they did so agressively (using the Pandemic as an excuse) so it improves the future balance sheet of Santander, for better ratios of ROE and similar. Anyway, that kind of assets doesn't have value for the regulatory requisites of capital.
Even after todays big jump of 6%, the P/ER is still <6. It's crazy. They offer a dividend yield of 7% and they still are investing back 50% of the profits in growing, which is happening (faster than inflation I mean). And they are doing like 2% annual buyback.
The efficiency ratio is 46%, much lower than its peers, and it has been decreasing during the last years.
The profits are geographically diversified. Most relevants: USA + UK 3.1b, Brazil 2.5b, Spain + Portugal 2b, Mexico+Chile 1.9b. And also Digital Consumer Bank with 1.3b, that is all around mostly West Europe (Germany and Scandinavia weight ~50% of the division).
I think that Spanish banks still suffer from the 2008 stigma. They were very involved in the housing bubble and they took many years to digest the consequences. Additionally, regulatory capital requirements, reduced the dividends during many years, as well as using tools to increase capital. Also a bad decade in Latin America didnt help.
However, the bank is pretty healthy right now. Morosity is very low compared to historical rates. The business is recurrent and boring. There has been a big push to reduce costs. They lost half of their personnel in Spain in 15 years. They bet strong in digitalization. This is why they have much lower cost efficiency than its peers, both in Europe and in America.
The interest rate hikes are increasing the interest gap between assets and liabilities, as they aren't paying for deposits as much as they should.
Also I consider a promising outlook for some latin American countries like Brazil. It digested their own bubble from the last decade, and it has a healthier position to go back to some healthy growth.
My feeling is that if Santander was called Bank of New England, and had the HQ in Manhattan, with exactly the same business and CF, it would be worth easily 2x the current share.
Submitted February 02, 2023 at 07:39AM by GranPino https://ift.tt/hVpq5fn
