SAN - Banco Santander

[TwoCitiesCapital]

From What Are You Buying Today thread.

 

I've significantly reduced my stake in SAN.

 

I've been wrong for a number of years on their ability to hit profitability targets, and while I'm still optimistic that they get there - I can't tell you why they'd be any more likely to get there now versus the last four years where they've failed to achieve it.

 

The stock is signficantly off it's lows and most of my profits in the name have been made relative value trades between it and its subsidiaries. It no longer made sense for SAN to be one of the largest names in my portfolio. 

 

Purchasing more PDER and ATUSF with the proceeds as I continue to move out of financial assets to companies that are backed by REAL assets.

 

Relative value trades are the gift that keeps on giving. We have been offered another opportunity as SAN & BSBR have rallied significantly since mid-year while BSMX gave up all of its prior gains for the year. I just rolled back into BSMX with what remains of the position.

 

Total returns across my SAN positions have been roughly 55% this year, not including dividends, from rolling back and forth. 3 rolls from SAN -> BSMX -> SAN -> BSBR. 2018 will show if BSBR --> BSMX was a good trade.

 

It is so strange that the subs can be so volatile while the parent is much more muted, but the relative value movements between them have provided plenty of opportunity to capture 20-40% spreads in performance differentials which make a difference in returns if you're only doing it with a small portion your position.

 

Jan-Feb: BSBR rages +40% while SAN/BSMX are +10% and +5% respectively. (30-35% spread)

Feb-Jun: BSBR falls -30% while SAN/BSMX are up  +15 and +20% respectively. (45-50% spread)

Jun-Aug: BSBR rises +25% while SAN/BSMX are -3% and +8% respectively.  (15-30% spread)

Aug-Dec: BSBR rises +6% while SAN/BSMX are +4% and -29% respectively.  (30-35% spread)

 

I don't know if the names will always be the volatile/independent of one another, but for now it, it's pretty been easy money buying the one that has significantly under performed and selling the one or two that have outperformed.

 

 

[John Hjorth]

From What Are You Buying Today thread.

 

I've significantly reduced my stake in SAN.

 

I've been wrong for a number of years on their ability to hit profitability targets, and while I'm still optimistic that they get there - I can't tell you why they'd be any more likely to get there now versus the last four years where they've failed to achieve it.

 

The stock is signficantly off it's lows and most of my profits in the name have been made relative value trades between it and its subsidiaries. It no longer made sense for SAN to be one of the largest names in my portfolio. 

 

Purchasing more PDER and ATUSF with the proceeds as I continue to move out of financial assets to companies that are backed by REAL assets.

 

Relative value trades are the gift that keeps on giving. We have been offered another opportunity as SAN & BSBR have rallied significantly since mid-year while BSMX gave up all of its prior gains for the year. I just rolled back into BSMX with what remains of the position.

 

Total returns across my SAN positions have been roughly 55% this year, not including dividends, from rolling back and forth. 3 rolls from SAN -> BSMX -> SAN -> BSBR. 2018 will show if BSBR --> BSMX was a good trade.

 

It is so strange that the subs can be so volatile while the parent is much more muted, but the relative value movements between them have provided plenty of opportunity to capture 20-40% spreads in performance differentials which make a difference in returns if you're only doing it with a small portion your position.

 

Jan-Feb: BSBR rages +40% while SAN/BSMX are +10% and +5% respectively. (30-35% spread)

Feb-Jun: BSBR falls -30% while SAN/BSMX are up  +15 and +20% respectively. (45-50% spread)

Jun-Aug: BSBR rises +25% while SAN/BSMX are -3% and +8% respectively.  (15-30% spread)

Aug-Dec: BSBR rises +6% while SAN/BSMX are +4% and -29% respectively.  (30-35% spread)

 

I don't know if the names will always be the volatile/independent of one another, but for now it, it's pretty been easy money buying the one that has significantly under performed and selling the one or two that have outperformed.

 

You're really good at doing this kind of rolls between SAN and the SAN subs , TwoCitiesCapital.

 

As I see things, those rolls have about doubled your return on SAN related stuff. SAN itself up about ~24 percent this year [in USD, & so far].

 

- - - o 0 o - - -

 

Polish bolt on : Santander and its subsidiary Bank Zachodni WBK acquire Deutsche Bank's retail banking business in Poland.

[TwoCitiesCapital]

From What Are You Buying Today thread.

 

I've significantly reduced my stake in SAN.

 

I've been wrong for a number of years on their ability to hit profitability targets, and while I'm still optimistic that they get there - I can't tell you why they'd be any more likely to get there now versus the last four years where they've failed to achieve it.

 

The stock is signficantly off it's lows and most of my profits in the name have been made relative value trades between it and its subsidiaries. It no longer made sense for SAN to be one of the largest names in my portfolio. 

 

Purchasing more PDER and ATUSF with the proceeds as I continue to move out of financial assets to companies that are backed by REAL assets.

 

Relative value trades are the gift that keeps on giving. We have been offered another opportunity as SAN & BSBR have rallied significantly since mid-year while BSMX gave up all of its prior gains for the year. I just rolled back into BSMX with what remains of the position.

 

Total returns across my SAN positions have been roughly 55% this year, not including dividends, from rolling back and forth. 3 rolls from SAN -> BSMX -> SAN -> BSBR. 2018 will show if BSBR --> BSMX was a good trade.

 

It is so strange that the subs can be so volatile while the parent is much more muted, but the relative value movements between them have provided plenty of opportunity to capture 20-40% spreads in performance differentials which make a difference in returns if you're only doing it with a small portion your position.

 

Jan-Feb: BSBR rages +40% while SAN/BSMX are +10% and +5% respectively. (30-35% spread)

Feb-Jun: BSBR falls -30% while SAN/BSMX are up  +15 and +20% respectively. (45-50% spread)

Jun-Aug: BSBR rises +25% while SAN/BSMX are -3% and +8% respectively.  (15-30% spread)

Aug-Dec: BSBR rises +6% while SAN/BSMX are +4% and -29% respectively.  (30-35% spread)

 

I don't know if the names will always be the volatile/independent of one another, but for now it, it's pretty been easy money buying the one that has significantly under performed and selling the one or two that have outperformed.

 

You're really good at doing this kind of rolls between SAN and the SAN subs , TwoCitiesCapital.

 

As I see things, those rolls have about doubled your return on SAN related stuff. SAN itself up about ~24 percent this year [in USD, & so far].

 

- - - o 0 o - - -

 

Polish bolt on : Santander and its subsidiary Bank Zachodni WBK acquire Deutsche Bank's retail banking business in Poland.

 

I promise you that I'm not doing anything special. I just have all 3 on a screener so I know how they're performing relative to one another. When the spread between one that I own and one that I don't own approaches 20-40% over a period of time, I start to get interested in taking profits and buying the unpopular one. Each time I do it, my expectations are that I may under perform for up to 18 months from the transaction before there's profit in it for me. I've been fortunate that the volatility has been so high as to truncate that 18-30 month expected holding period down to 4-8 months before I'm massively in the green and can roll once again.

 

It won't always be this easy, but for now, it seems like there's more juice to be squeezed.

[John Hjorth]

Santander 2017Q4 out today:

 

Santander 4Q 2017 Report.

Santander 4Q 2017 Results Presentation.

 

It looks fine to me. Especially the operations in Brazil seem to have been shooting out the lights.

 

- - - o 0 o - - -

 

Personally, I'll reduce the position in SAN materially soon. Somehow, it's just time for me to move on to new ventures, - hopefully better long term - and hopefully not as painfull as this one has been to me over time.

[TwoCitiesCapital]

 

From What Are You Buying Today thread.

 

I've significantly reduced my stake in SAN.

 

I've been wrong for a number of years on their ability to hit profitability targets, and while I'm still optimistic that they get there - I can't tell you why they'd be any more likely to get there now versus the last four years where they've failed to achieve it.

 

The stock is signficantly off it's lows and most of my profits in the name have been made relative value trades between it and its subsidiaries. It no longer made sense for SAN to be one of the largest names in my portfolio. 

 

Purchasing more PDER and ATUSF with the proceeds as I continue to move out of financial assets to companies that are backed by REAL assets.

 

Relative value trades are the gift that keeps on giving. We have been offered another opportunity as SAN & BSBR have rallied significantly since mid-year while BSMX gave up all of its prior gains for the year. I just rolled back into BSMX with what remains of the position.

 

Total returns across my SAN positions have been roughly 55% this year, not including dividends, from rolling back and forth. 3 rolls from SAN -> BSMX -> SAN -> BSBR. 2018 will show if BSBR --> BSMX was a good trade.

 

 

 

And like clockwork -  returns since 12/16/17

 

BSMX  +15%

BSBR +3%

SAN -15%

 

It's getting tempting to roll back into SAN, but my basic model suggests BSMX is still very, very cheap relative to the parent so will probably hold for another +10-20% relative return.

[John Hjorth]

Banco Santander Press Release [January 15^th 2019] : The Grupo Santander Board today announces that Andrea Orcel's appointment to the role of Group CEO will not proceed.

Financial Times [January 16^th 2019] : Banco Santander - How Santander’s ditching of Andrea Orcel stunned finance industry.

 

Shocking read.

[John Hjorth]

Reuters [April 12^th 2019] : Santander launches offer to buy up to 25 percent of Mexican unit in an all-share deal.

[TwoCitiesCapital]

Reuters [April 12^th 2019] : Santander launches offer to buy up to 25 percent of Mexican unit in an all-share deal.

 

Well dang! Wish I still held the Mexican ADS' but had just rolled back to the parent a month or so go given the relative outperformance of BSMX versus SAN.

 

Will be interesting to watch and is probably a smart move (just like the Brazil tender has proven to be), but this may take away some flexibility with my lucrative trading strategy of rolling back and forth between the subs/parent :/

[petec]

Is anyone watching this? I have not followed but staggered by how cheap it is. 0.45x book and 5x earnings (consensus). I have not dug yet but interested in any thoughts.

[BroKon]

Its hard to find an expensive European bank at the moment (except maybe some Scandis - and that is only relative). Market is assuming NIM will continue to get crushed, which is probably a fair assumption given where yields are, and NPLs will rise, again not an unfair argument either, with energy companies the new worry. But I think you need to extrapolate continued bad news out a few years to justify these valuations.

ECB meets on Thursday so if they don't cut rates I would expect some kind of bounce (subject to no virus news). I think a basket of euro banks at these prices may make sense, but I thought they were cheap last week too. There are a lot of investors with very polarised views on these, so I am sure someone will be happy to take the other side of the argument.

[TwoCitiesCapital]

Is anyone watching this? I have not followed but staggered by how cheap it is. 0.45x book and 5x earnings (consensus). I have not dug yet but interested in any thoughts.

 

Still long and still wrong :/

 

Seems super cheap. Seems like an excellent bank with excellent diversification, and yet the stock only really moves in one direction....

[elliott]

I dont know how accurate morningstar figures are, but according to them its been about 10Y since Santander achieved a ROA above 0.5% (which is already a low bar), and they are quite levered (equity ratio of less than 7%).

I had the impression that Santander was one of those companies that had been more worried about growing than being profitable. But its just an impression, I have never looked into this company, although I was a client once.

[petec]

Euro-NIMs do worry me. The Eurozone is f**ked.

 

What I want to dig into is how much of the market cap is justified by the Latin American operations, which are generally superb.

[TwoCitiesCapital]

Reuters [April 12^th 2019] : Santander launches offer to buy up to 25 percent of Mexican unit in an all-share deal.

 

Well dang! Wish I still held the Mexican ADS' but had just rolled back to the parent a month or so go given the relative outperformance of BSMX versus SAN.

 

Will be interesting to watch and is probably a smart move (just like the Brazil tender has proven to be), but this may take away some flexibility with my lucrative trading strategy of rolling back and forth between the subs/parent :/

 

Well, while the timing of the last purchase was a bit poor due to Covid, they're getting an absolute steal here if they get it for this price. 120 pesos for every ADR implied a price of $5.88 - another $0.28 per share to squeeze out in arbitrage.

 

https://seekingalpha.com/filing/5448273