Opinions
David Driscoll
Banco Santander SA
SAN-N
COMMENT
Mar 13, 2017
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.
This hasn’t turned a corner yet. They are doing fine in Britain. Spain is still an issue. They are having problems in the US, Mexico and Brazil. This is emerging markets, and this is a common theme of many companies out there, especially the banks. You get a slowdown because of the rising US$. The net interest income growth is negative. Efficiency ratios are good and have their costs under control. The nonperforming loans are a little high, which has to do with Spain and Brazil. Trading at 12X earnings. He would be looking at Barclays (BCS-N) which wants to turn itself around and get its BBB credit rating back and are selling off assets in a big way. Tier 1 capital is starting to rise in a big way so it is becoming more profitable. There is also a Swedish bank, Svenska Handlesbanken (?) which has branches in Sweden, Norway, Finland, England, Lithuania, Latvia and Estonia. Their business model uses the steeple effect, where head office will give them the product, but it is up to the branch managers to climb to the top of the steeple and whatever they can see in 360° is their territory. They end up with having better margins and better efficiencies because the branch managers have to be accountable for their actions. Dividend has been growing at a 15% clip per year. A rise in interest rate will be beneficial for them.