3 Exceptional Reasons To Buy Banco Santander SA plc

Royston Wild looks at the key factors which make Banco Santander SA plc (LON: BNC) a solid stock selection.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

santander

Today I am looking at why I believe Banco Santander SA (LSE: BNC) (NYSE: SAN.US) is primed to surge skywards.

Profits primed to head higher

Banco Santander’s turnaround strategy following the 2008/09 global financial crisis has been highly impressive to say the least. Indeed, last month’s full-year results showed attributable profits surge more than 90% to 4.37bn euros last year, the result of lower write-downs compared with previous periods, particularly in the bombed-out economic regions of Spain.

As the bank noted, the economies of its main target markets are expected to grow in 2014, according to the IMF, the first such instance since before the banking crash occurred. With the bank having strengthened its balance sheet significantly since then — its Basel III capital ratio leapt to 10.9% last year — I believe that Santander is well placed to enjoy the fruits of its intensive self-help exercises well into the future.

Great emerging market exposure

Indeed, Santander’s extensive operations in long-term growth regions underpins this rosy outlook — the company sources 53% of all profits from developing markets, with those of Latin America responsible for 47% of the group’s bottom line.

Brazil is the firm’s single largest market — almost a quarter of profits are sourced from the country — while the continental hotspots of Mexico and Chile are third and fourth correspondingly.

Santander noted in January’s results that both loans and deposits rose 14% in emerging regions last year, and investors will be cheered by the bank’s improved performance in South America — indeed, market share grabs in a number of sectors, including SME loans, mortgages and insurance, is helping to drive performance in the region. Loans and deposits in Brazil alone rose 7% and 6% during 2013.

A stunning all-round value pick

Following January’s full-year results, City analysts expect Santander’s transformation plan to continue delivering the goods in the coming years.

Forecasters expect earnings to advance by a chunky 25% in 2014 and a further 18% next year, figures which create P/E ratings of 12.6 and 10.8 respectively, comfortably trouncing a prospective average of 16.4 for its banking peers. And these stratospheric growth projections leave Santander dealing on price to earnings to growth (PEG) readouts around 0.5 for these years, well below the value benchmark of 1.

Pleasingly for income investors, these solid growth predictions are also expected to keep dividend yields comfortably above a forward average of 3.7% for the rest of the banking sector. Although the full-year payout is expected to dip from 50.1 euro cents per share this year to 48.1 cents in 2015, these payments still generate mammoth yields of 7.7% and 7.3% correspondingly.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Royston does not own shares in Banco Santander SA.

More on Investing Articles

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

How I could make a 10% yield for high passive income a reality

Jon Smith explains how he can target high passive income from top-yielding stocks, including one specific example he'd consider.

Read more »

Investing Articles

I’d buy 1,784 shares of this FTSE 100 stock to target £350 of monthly passive income

Muhammad Cheema takes a look at how British American Tobacco shares, with a dividend yield of 10.1%, can generate a…

Read more »

White female supervisor working at an oil rig
Investing Articles

1 ex-FTSE 100 stock that I think will get promoted soon

Jon Smith flags up an energy stock that used to be in the FTSE 100 and currently has strong momentum…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »