Santander (LSE: BNC) (NYSE: SAN.US) is no ordinary bank. While the company may be best known for its high-street presence and exposure to emerging market economies, there’s more to the lender than meets the eye.
For example, a few weeks ago I covered Santander’s goal to branch out into the cloud storage market, taking on tech giants such as Amazon and IBM, as well as offering customers a secure location for digital storage.
And the bank is also building a presence in the renewable energy industry.
However, due to complexities of running an energy business and the regulatory hurdles Santander would have to overcome in order to operate an energy business effectively, the bank isn’t running these projects by itself.
Renewable energy giant
Over the past seven years, Santander has become one of the leading developers of renewables projects around the world. The bank has directly invested over $2bn in renewable energy and water projects.
Additionally, Santander offers assistance to other investors within the renewable energy industry. Services offered include financing, project management, installation and administrative procedures for the life of the project.
But it’s the bank’s portfolio of renewable energy and water assets that is really interesting. Santander owns these assets in partnership with the Ontario Teachers’ Pension Plan and the Public Sector Pension Investment Board, two of Canada’s largest pension funds, and the trio are planning to invest billions in renewable energy projects over the coming years.
Separate division
Santander’s infrastructure assets aren’t just limited to the company’s renewable energy and water projects. The bank’s Asset & Capital Structuring division, a team of 30 employees, specialises in infrastructure equity investments and has built a global portfolio of assets spanning Spain, Italy, UK, US, Brazil and Mexico. According to Santander, this team manages the bank’s existing infrastructure investments while keeping an eye out for further acquisitions.
Foolish summary
All in all, a separate infrastructure division will only benefit Santander and the bank’s shareholders.
Indeed, unlike banking, which can be a complex and unpredictable business, infrastructure investing is relatively simple. What’s more, infrastructure assets usually produce a constant and predictable stream of income, giving Santander a financial cushion to fall back on during times of stress.
Best of breed
Santander’s diversification is just one of the many reasons why the bank is one of the best investments in the financial sector, for me.
Moreover, at present levels Santander’s shares appear to be undervalued. Santander currently trades at a forward P/E of around 13, and the bank’s earnings are forecast to expand at 13% to 14% per annum for the next two years. Santander’s shares also support a dividend yield of 3.1%.
