Ross812 Posted April 18, 2012 Share Posted April 18, 2012 I threw this on my watch list a long time ago and wanted to know if anyone has anything to add while I’m looking into this company. I know ERICOPOLY had some options on this earlier this year. At first glance this thing is getting killed for being a Spanish bank but actually gets most of its revenue from South America (51%); Brazil making up 28% of revenue. In Europe Banco Santander gets 24% of its revenue from Spain, 15% from the U.K. and 10% from Poland and Germany. So far I’ve read a few seeking alpha articles and I’m going to jump into their last annual report. I know this is going to come up so I’ll head it off right here. Spain imposes a 21% tax on dividends. If STD is held in a taxable account, this is a non issue because you get the money back when you file your taxes. For tax advantaged accounts Banco Santander has a DRIP program to avoid the 21% tax: http://www.santandershareholder.co.uk/financial-information/dividends/scrip-dividends1 Link to comment Share on other sites More sharing options...
racemize Posted April 18, 2012 Share Posted April 18, 2012 Given the other threads this morning, does this have any Argentina issues? Link to comment Share on other sites More sharing options...
Ross812 Posted April 18, 2012 Author Share Posted April 18, 2012 Argentina accounts for 2.7% of profits according to the 2011 annual report. Link to comment Share on other sites More sharing options...
Ross812 Posted April 18, 2012 Author Share Posted April 18, 2012 Contribution to Banco Santander’s Profit: 28%- Brazil 13%- Spain 12%- US 12%- UK 10%- Mexico 7%- Chile 5%- Germany 3%- Poland 3% - Argentina 3%- Rest of Latin America 2%- Portugal 2%- Rest of Europe Link to comment Share on other sites More sharing options...
JEast Posted April 18, 2012 Share Posted April 18, 2012 For US taxed accounts, you do not always get the tax back. It depends on the tax bracket you are in. For reference, see IRS Form 1116. Been on the radar, but who can read a bank balance sheet now-a-days :) I guess one can always hope that the disguised hedge fund (I mean bank) has good folks running it. Cheers JEast Link to comment Share on other sites More sharing options...
JEast Posted April 18, 2012 Share Posted April 18, 2012 Also, do not worry about the contribution percentages -- worry about the potential loss from those areas. Recall that a few insurance companies went bankrupt with just 2% of premiums written in a certain, or concentrated, area. Cheers JEast Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 18, 2012 Share Posted April 18, 2012 Santander is one of the best managed retail banks in the world. It is not doing much in terms of investment banking after Botin's daughter made a mess of it some years ago. One key issue I would follow closely is how much they have been buying of government debt after the recent Super Mario program. They were the first bank in Spain to start cutting costs and increasing reserves when the bubble exploded. If one bank survives in Spain, it will be Santander but that does not say much these days (ie: National Bank of Greece). Random tweets: GENERAL Santander 0.5x BV, 5x P/E, 12.6% div yield. LATAM ops with high ROE and growth worth more than current marketcap. Plus US, UK, Poland ... "Banco Santander and BBVA have long used their operations in South America as ways of playing down the severity of the imploded RE bubble" How bad can it really get in Spain for Santander? These guys survived Argentina 2000 and USA 2008. SPAIN AND PORTUGAL EXPOSURE Annual report 2011 p24-25, contribucion España y Portugal 15%. Have not checked %loans. (income) I am getting ~25% of "credito a clientes en balance" for Spain + Portugal from latest annual report. $STD Gross (w/o allowances) credit exposure Spain plus Portugal is 33%, close to your number. SOPS Most STD competitors are publicly traded, and since Santander is Top 3 in most countries it's not difficult to put an x of BV. Santander has two ops publicly traded (SAN+BSBR), Sovereign is USA bank, and UK is coming Mexico is probably the most difficult. The other two large banks Banamex and Bancomer are owned by Citi and BBVA. Use a 2x BV. Santander Colombia, a tiny operation, sold for $1.2B. That is after selling 8% stake in Santander Chile for $0.8B. $STD marketcap $58B. Link to comment Share on other sites More sharing options...
txitxo Posted April 18, 2012 Share Posted April 18, 2012 Santander is one of the best managed retail banks in the world. It is not doing much in terms of investment banking after Botin's daughter made a mess of it some years ago. One key issue I would follow closely is how much they have buying of government debt after the recent Super Mario program. They were the first bank in Spain to start cutting costs and increasing reserves when the bubble exploded. If one bank survives in Spain, it will be Santander but that does not say much these days (ie: National Bank of Greece). Random tweets: GENERAL Santander 0.5x BV, 5x P/E, 12.6% div yield. LATAM ops with high ROE and growth worth more than current marketcap. Plus US, UK, Poland ... "Banco Santander and BBVA have long used their operations in South America as ways of playing down the severity of the imploded RE bubble" How bad can it really get in Spain for Santander? These guys survived Argentina 2000 and USA 2008. SPAIN AND PORTUGAL EXPOSURE Annual report 2011 p24-25, contribucion España y Portugal 15%. Have not checked %loans. (income) I am getting ~25% of "credito a clientes en balance" for Spain + Portugal from latest annual report. $STD Gross (w/o allowances) credit exposure Spain plus Portugal is 33%, close to your number. SOPS Most STD competitors are publicly traded, and since Santander is Top 3 in most countries it's not difficult to put an x of BV. Santander has two ops publicly traded (SAN+BRBR), Sovereign is USA bank, and UK is coming Mexico is probably the most difficult. The other two large banks Banamex and Bancomer are owned by Citi and BBVA. Use a 2x BV. Santander Colombia, a tiny operation, sold for $1.2B. That is after selling 8% stake in Santander Chile for $0.8B. $STD marketcap $58B. This is a very good description of Santander. Botín, the executive chairman, is an old school banker, very cautious, cunning as a fox, with a piratical bent (Botín means "booty" in Spanish ;). He has a long track record of seeing things coming before others, look at how he handled the ABN Amro acquisition in 2007. Spain had a terrible crisis in the 70's, after Franco died, with the worst post-WWII stock bear market in a OECD country. These guys not only survived, but thrived, there were 7 big banks in Spain at the time, with almost no international presence. There are only 2 now, and Santander is one the largest companies in the world. They also have enormous political clout, something which is very bad for Spaniards but good for STD shareholders, and I expect them to withstand pressure to buy Spanish bonds better than other banks. And they are TBTF at the EU level as well. They won't go under. I however don't see why anybody would want to invest now in European bank stocks, unless you are forced to invest in financials. For me they are in the "too hard" pile, specially compared with the alternatives: you can buy plenty of cheap, high quality, easy to understand and much safer stuff in Europe nowadays. Link to comment Share on other sites More sharing options...
alwaysinvert Posted April 18, 2012 Share Posted April 18, 2012 What about the diluting 'dividend' programme? Seems to destroy a lot of value. Link to comment Share on other sites More sharing options...
Ross812 Posted April 19, 2012 Author Share Posted April 19, 2012 Lending by country in Europe excluding the UK: Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 19, 2012 Share Posted April 19, 2012 Lending by country in Europe excluding the UK: Ross, that is Consumer Finance. Go to page 146 "Credit to Clients Gross". Spain plus Portugal 33%. Very detailed Risk Management report. Also good are the investor day presentations: http://www.santander-center.com/investorday/index.html the recent CEO presentation http://www.santander.com/csgs/StaticBS?ssbinary=true&blobtable=MungoBlobs&blobkey=id&SSURIsscontext=Satellite+Server&blobcol=urldata&SSURIcontainer=Default&SSURIsession=false&blobwhere=1278682222830&blobheader=application%2Fpdf&SSURIapptype=BlobServer#satellitefragment And 2011 results ... check Santander efficiency ratio and NPAs versus average per country http://www.santander.com/csgs/StaticBS?ssbinary=true&blobtable=MungoBlobs&blobkey=id&SSURIsscontext=Satellite+Server&blobcol=urldata&SSURIcontainer=Default&SSURIsession=false&blobwhere=1278683029440&blobheader=application%2Fpdf&SSURIapptype=BlobServer#satellitefragment Link to comment Share on other sites More sharing options...
ERICOPOLY Posted April 19, 2012 Share Posted April 19, 2012 I have been buying again this week. I don't see the connection between the stock price and their Spain exposure. Link to comment Share on other sites More sharing options...
Ross812 Posted April 19, 2012 Author Share Posted April 19, 2012 Thank you PlanMaestro. I haven't researched a bank, other than Bank of America, so its not my circle of competence. I've been trying to compare STD and BAC to WFC as a conservative reference. Do you have any reading material you would recommend to aid in analyzing banks? I agree with another poster that there may be easier companies to understand in Europe that are selling for a discount. Banco Santander may be an example of a world class business selling at a bargain price; something that doesn’t happen very often. Link to comment Share on other sites More sharing options...
prevalou Posted April 19, 2012 Share Posted April 19, 2012 Not a word about their spanish sovereign exposition. What are their liquidity composed of ? Are their european sovereign exposition marked to market ? Link to comment Share on other sites More sharing options...
rijk Posted April 19, 2012 Share Posted April 19, 2012 "and I expect them to withstand pressure to buy Spanish bonds better than other banks" "Not a word about their spanish sovereign exposition" does anybody have any estimates of how much sovereign debt they are holding now? how much of the €163 billion ended up on std's balance sheet that could potentially become very dangerous if spain follows greece??? http://soberlook.com/2012/04/how-to-come-up-with-163bn-for-spanish.html regards rijk Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 19, 2012 Share Posted April 19, 2012 Not a word about their spanish sovereign exposition. What are their liquidity composed of ? Are their european sovereign exposition marked to market ? There were some words but there is a lot more in the annual report, risk management section, pages 146-203, page 157, 190, 191 in particular. I wish all banks had a report like this one. BTW, I have not bought Santander or any of its subsidiaries (BSBR Santander Brasil looks very interesting). http://www.santander.com/csgs/StaticBS?ssbinary=true&blobtable=MungoBlobs&blobkey=id&SSURIsscontext=Satellite+Server&blobcol=urldata&SSURIcontainer=Default&SSURIsession=false&blobwhere=1278681725312&blobheader=application%2Fpdf&SSURIapptype=BlobServer#satellitefragment Link to comment Share on other sites More sharing options...
prevalou Posted April 19, 2012 Share Posted April 19, 2012 Thanks PlanMaestro. Unluckily it is partial information because we don't get the trading sovereign portfolio. MoreoverI don't know if the sovereign non trading exposition is marked to market (difference versus us Gaap) Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 19, 2012 Share Posted April 19, 2012 Thanks PlanMaestro. Unluckily it is partial information because we don't get the trading sovereign portfolio. Moreover, I don't know if the sovereign non trading exposition is marked to market (difference versus us Gaap) As I said, there is a lot more in the annual report. Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 20, 2012 Share Posted April 20, 2012 CDS spreads of some European banks including Santander http://www.distressedvolatility.com/2011/08/links-european-bank-credit-default.html http://www.markit.com/cds/most_liquid/markit_liquid.shtml Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 21, 2012 Share Posted April 21, 2012 Bank of Spain: NPLs http://www.bde.es/webbde/en/secciones/prensa/Agenda/Datos_de_credit_c62379ebaa85631.html Link to comment Share on other sites More sharing options...
Shane Posted April 24, 2012 Share Posted April 24, 2012 http://online.wsj.com/article/SB10001424052702303592404577361542344088140.html?mod=WSJ_hp_LEFTWhatsNewsCollection I hope everyone can see this. Looks like they have a lot of opportunities to raise capital if need be. Article claims the mexican division could be worth $20 Billion while the company as a whole is selling for $55 Billion... Said division represented 10% od revenue. This stock is becoming attractive to me. Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 24, 2012 Share Posted April 24, 2012 http://online.wsj.com/article/SB10001424052702303592404577361542344088140.html?mod=WSJ_hp_LEFTWhatsNewsCollection I hope everyone can see this. Looks like they have a lot of opportunities to raise capital if need be. Article claims the mexican division could be worth $20 Billion while the company as a whole is selling for $55 Billion... Said division represented 10% od revenue. This stock is becoming attractive to me. Net income in 2011 was $1.3 billion dollars so $20 billion would be 15x earnings. Enjoying a beautiful sunset with Santander Mexico's headquarters in the background. Market share by assets Bancomer (BBVA) 21.1% Banamex (Citigroup) 18.6% Santander 12.7% Banorte 10.5% More info: http://portafolioinfdoctos.cnbv.gob.mx/Documentacion/Boletines/Portal_NW/BE_BM_01122011.pdf Link to comment Share on other sites More sharing options...
Shane Posted April 24, 2012 Share Posted April 24, 2012 Plan - You must mean Billion? Otherwise I am confused Link to comment Share on other sites More sharing options...
PlanMaestro Posted April 24, 2012 Share Posted April 24, 2012 Plan - You must mean Billion? Otherwise I am confused No more sunsets for me. Corrected. Link to comment Share on other sites More sharing options...
Shane Posted April 24, 2012 Share Posted April 24, 2012 Plan - It seems to me your an excellent banking analyst and are comfortable with your skills, I'm interested to hear why you have not bought yet? I'm less confident and teetering on buying in. Link to comment Share on other sites More sharing options...
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