Opinions
Darren Sissons
Banco Santander SA
SAN-N
HOLD
Nov 11, 2016
Stock price when the opinion was issued
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The large Spanish banks are up 40-50% this year due to more tourism spending there, plus the bank's diversification across Latin American. They may leave the UK and its high taxes and laws. But the Spanish banks are 3x riskier than European ones, because the Spanish one's non-performing assets are 3% vs. the 1% average. Take this with a grain of salt. SAN is having a great year, but is coming off previous lows.
One of the larger banks in Europe, with an international footprint. In 6 months, there's been a sea change in sentiment on investing in Europe. Banks will reap the rewards of increased spending when we come out of this tumultuous time.
It's not that the gains aren't valid, but it's come a long way in a very short time. Will probably see a bit of a pullback, a bit rich now.
Probably a 10-year bull market in financial services in front of us. Global stocks underperformed for a long time, depending on where you're looking. When a market goes sideways for 10-15 years, and then makes a new high, that's the beginning of a new long-term bull market. Virtually every major global market is doing that right now. Global stocks are much cheaper than US stocks. USD is now falling against every major currency.
Great bank and digital banking platform, geographically diversified. Between 13-15% return on tangible equity. Great balance sheet. Trades at only 9x. Dividend grows nicely, buying back shares. Very good operators and allocators of capital. Global banks can be revalued compared to the rest of the world. Yield is 3.11%.
A behemoth bank, domiciled originally in Spain, but has global operations. When the US lowered interest rates, ultimately the rest of the world followed. As the US exported capital, hot money moved to different markets. When the US starts to raise rates, capital will flood from other markets. Ultimately there is an expectation that we will see higher rates across the globe when the US raises rates. This bank has big operations in Europe and in south America. An interesting company. Good governance and didn’t blow up during the crisis. He thinks there is more upside here.