Banco Santander SA (SAN)

Interest rates will go up after the ECB changes chairs in June 2019. Each quarter they put up $2 billion+ of net income and are trading a hair above book value now, plus negative sentiment to Euro banks now. (3.3% dividend yield, Analysts' price target: $106.76)

He doesn’t own this, but he owns comparable banks. The whole global banking sector is trading at very cheap multiples. They are all under pressure from the flattening yield curve, and they all pay hefty dividends. The bank’s poor performance is sector-driven more than driven by the political issues in the countries where it does business.

He owns this as a European bank holding in the portfolio. The flat yield curve is holding them back. He will continue to hold it for when the yield curve normalizes.

Dividend growth for last 5 years OK, last 10 years negative. Implores investors, please don’t chase yield. Think about long-term growth rate of the dividend. YTD down 14%. Likes that it’s a retail bank, but Spain is a problem right now. Not a lot of growth out of Europe. Impact of Spain separatism is that economy will slow down, loan loss provisions pick up.

This bank had some issues a few years ago. The dividend is secure, he believes. Europe is in recovery mode and there is good growth opportunity with this holding.

This suffered in the global crisis, like all other banks. They do business in the US, Latin America and Spain and are doing OK. Higher interest rates are coming and they will be good for the banks. This should do well in the next 3-to-5 years.

The European banks are behind the Canadian and US in recovery from the financial crisis. This is not a Spanish bank as it gets only 25% of revenue from Spain. They are well diversified. They are working through an organization they were handed to manage.

The positive for this bank is that it is a retail global bank. They are in Europe, South America, Latin America and North America, but not a lot in Asia. The bad news is that there are political machinations going on in Spain that are not making people happy. Also, it is the largest car loan issuer in the US, and that is not going well. Raised the dividend 9% last year, but over the last 5 years it has fallen 13%.

This is a big, big bank. Operations are in Europe as well as Latin American. If you owned a bank in the last 8 years and is one of the global behemoth's, you are probably underwater if you owned it before the global financial crisis. Since the financial crisis, banks have raised substantial amounts of capital, with a global economy that is starting to recover nicely. He wouldn't sell at this time.

Spanish Bank. Synchronized global growth benefits it. It drives productivity growth. So financials should do well. There is still rate correction to go on there. The yield curve is steepening there. It has a history of being aggressive with credit and M&A philosophy so he would be careful there. On the whole it checks a lot of boxes.

Banks in Spain, like the Italian banks were coming off a bottom about a year or so. This one has about 50-60% of profits from Spain and then the rest from Latin America. There should be improvements in both markets. He prefers BBVA-N, which he marginally prefers right now.

Effects of Catalonia on this bank? 42% of revenues are from Latin America with the other 41% in Europe, mostly Spain and Britain. Valuations are up 20% this year. PE multiple is 13.4. Cheap on a Price to Book and Price to Sales method, but Catalonia is a little wart that is on their backside right now. He is not interested in this, because dividend growth for him has to be over 10%. Dividend yield of 3.5%.