TwoCitiesCapital Posted January 22, 2014 Share Posted January 22, 2014 Figured its about time to start a thread for this one instead of random comments in the Santander thread or the Brasil thread. Currently trades for just over 0.5x book value, single digit P/E, just paid a 20%ish special dividend and replaced it with debt to optimize capital structure and increase ROE, and pays a 5% dividend. I know emerging markets haven't been popular but that doesn't seem to justify such a discount. I'm not very good on bank analysis but have been building a small position over the past few months and would like to build it into a larger conviction position depending on what I learn in this thread. Any of you banking experts out there have any opinions on this stock, why it trades at a discount, and catalysts that might reverse it? Also, since I'll be following this from the ground floor it'd be helpful, and much appreciated, if you could break down general bank analysis so I (we) can better learn the industry. Link to comment Share on other sites More sharing options...
PlanMaestro Posted January 22, 2014 Share Posted January 22, 2014 http://www.bdlive.co.za/world/americas/2013/11/28/savings-accounts-lawsuit-could-take-toll-on-brazilian-economy Link to comment Share on other sites More sharing options...
dutchman Posted January 23, 2014 Share Posted January 23, 2014 Am I hallucinating, or is the the Plan man really back ? Lol, this is my first post -- I've noticed PlanMaestro was a prolific contributor and then he suddenly disappeared! This is a great forum, I've learned a lot reading through the many wonderful threads! Thanks everyone. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted January 23, 2014 Author Share Posted January 23, 2014 Am I hallucinating, or is the the Plan man really back ? Lol, this is my first post -- I've noticed PlanMaestro was a prolific contributor and then he suddenly disappeared! This is a great forum, I've learned a lot reading through the many wonderful threads! Thanks everyone. Seems like he comes back occasionally in the banking threads. Was hoping this would attract his attention. Plan, thanks for your link. First I've seen of this while building the position. Any tips or links to other threads that lays out your approach to analyzing banks? Link to comment Share on other sites More sharing options...
dutchman Posted January 23, 2014 Share Posted January 23, 2014 Tweedy Browne: "Banco Santander (Brasil) represents our first investment in a Brazilian company. With emerging markets such as Brazil contracting somewhat as China slows, and money moving out of emerging markets based on expectations of a change in U.S. Federal Reserve monetary policy, we were afforded a pricing opportunity in what we believe to be a very attractive bank. Although Banco Santander S.A. (BSBR), a large Spanish bank, is a significant shareholder of Banco Santander (Brasil), the Brazilian bank is an independently listed subsidiary with its own management team, board of directors, and capital base. At initial purchase, Banco Santander (Brasil) was trading right around tangible book value, below 10 times 2013 estimated earnings, and had a dividend yield of approximately 5%. For a bank, it is extremely underleveraged (19.9% Tier 1 capital ratio), has high net interest margins, and among its three local competitors, has the highest consumer exposure to what we believe will continue to be a rapidly growing middle class over the longer term in Brazil." Link to comment Share on other sites More sharing options...
PlanMaestro Posted January 23, 2014 Share Posted January 23, 2014 It's just that I don't want to get into internet discussions, so I don't post regularly anymore. More on banking: http://variantperceptions.wordpress.com/charting-banking/ http://variantperceptions.wordpress.com/banks-in-my-mind/ BTW, the tier 1 mentioned by Tweedy has issues especially after the div. Do your own TBV/TA. Link to comment Share on other sites More sharing options...
gary17 Posted January 23, 2014 Share Posted January 23, 2014 Plan, do you by chance know the Mac price to book for p and c insurers in the last thirty years or know where to find the data? Sorry about being off topic but i was reading up ur insurance write up after browsing around your blog Thanks Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted January 28, 2014 Author Share Posted January 28, 2014 Plan, Thanks for the links to your blog. I've read through many of the entries and am putting together metrics for SAN and BSBR to evaluate their performance over time in areas of profitability, efficiency, solvency, and my estimates of earnings potential. I'm also trying to figure out ways to esimate BSBR's potential legal liability. I have three questions for you: 1) Where is the best place to locate the loan loss reserve? All I seem to be able to locate in Santander's annual report is the loan loss provision, but I can't seem to locate a figure for the entire reserve. 2) Investopedia says the numerator of the texas ratio is the sum of non-performing loans and assets. Are the NPLs disclosed by the banks inclusive of these "non-performing assets" or is that something separate? 3) I have found many estimates of what the state-owned banks' liabilities are in the Brazilian lawsuits; however, I've found no such estimates for each private bank's potential exposure. Just their aggregate exposure. Do you have any suggestions for what to do here? Thanks for the guidance thus far. Link to comment Share on other sites More sharing options...
Eye4Valu Posted January 28, 2014 Share Posted January 28, 2014 Morningstar Stock Analyst Note Santander Brasil Paying Special Dividend as Part of Capital Optimization Plan by Timothy Puls | 01-10-14 | 4:00PM | E-mail Note "ADR shares for Banco Santander Brasil went ex-dividend today, Jan. 10, 2014. Today’s stock price movement correlates with a BRL 6 billion special dividend announced in September and approved in November as a part of management’s capital optimization plan. Holders of ADR shares will receive an amount of BRL 1.57 per ADR, or $0.67 per ADR based on the most recent exchange rate of BRL 2.37 per $1 (as of Jan. 10, 2014). The actual U.S. dollar payout will be calculated using the exchange rate on Jan. 27, 2014, and will be distributed on Jan. 29, 2014. In conjunction with the special dividend, the company intends to issue debt securities abroad that will total BRL 6 billion. On Jan. 14, 2014, shareholders of record receiving at least a BRL 400,000 payout from the dividend will have the option to subscribe for the debt notes using only funds received from the dividend. Santander Spain owns roughly 75% of Santander Brasil and has committed to subscribing for the notes with its entire portion of the special dividend. Additionally, the Spanish parent also agreed to subscribe for any and all of the Notes not subscribed by other shareholders of the company, making this an entirely private placement. The capital optimization plan doesn't affect our view that Santander Brasil is very well-capitalized. The bank’s Tier 1 capital ratio will remain above 20%, the highest of Brazil’s major banks. This special dividend is nothing more than an attempt to reduce the company’s overall cost of funding by switching to a higher ratio of debt/equity. As a result of the special dividend, we are decreasing our fair value estimate for ADR shares of Banco Santander Brasil to $9. This incorporates the most recent exchange rate of BRL 2.37 per $1. Our narrow moat rating is unchanged." Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted March 14, 2014 Author Share Posted March 14, 2014 Has Santander ever repurchased a company that it IPO'd? Was just thinking that it would be a pretty good deal for them to take this back to being private at $4-5 after selling a quarter of it for much higher prices. It would further increase exposure to emerging markets at a favorable exchange rate/price which seems to be thedirection for the future of the bank. Especially now that they look to be on the path of earning tens of billions again, this wouldn't be a large purchase for them at all. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted April 29, 2014 Author Share Posted April 29, 2014 Has Santander ever repurchased a company that it IPO'd? Was just thinking that it would be a pretty good deal for them to take this back to being private at $4-5 after selling a quarter of it for much higher prices. It would further increase exposure to emerging markets at a favorable exchange rate/price which seems to be thedirection for the future of the bank. Especially now that they look to be on the path of earning tens of billions again, this wouldn't be a large purchase for them at all. Well, that didnt take long to get an official answer. Congrats to all who have been buying http://www.nasdaq.com/article/banco-santander-q1-profit-rises-offers-to-buy-25-of-its-brazilian-subsidiary-20140429-00175 Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now