Banco Santander (LSE: BNC) shares were trading for 382p half a decade ago. Today, they’re only a little above that at 385p.
But that only tells half the story. In 2020, the pandemic sent the share price as low as 133p. Investors who bought at that point would have nearly tripled their money!
So what if I’d put five grand into shares of this global bank just one year ago? How much would I have made so far? Let’s take a look.
An outperformer
Here’s how the stock has done over multiple periods:
| 6 months | +26.4% |
| One year | +19.3% |
| Two years | +46.6% |
| Three years | +55.7% |
| Four years | +140% |
| Five years | +0.82% |
As we can see, the shares are up 19.3% over the last year. This means my hypothetical £5,000 would now be worth £5,965 on paper.
What’s more, I’d have collected a couple of cash dividends in this time too. These would have taken my total return above £6,000. Not bad at all.
What’s been going right at Santander?
Strong financial performance
Last year, the bank’s net profit rose 15% year on year to a record €11.1bn. And it met all of its annual targets, with revenue growing 13%, above the 10% target.
Its return on tangible equity (RoTE), a key measure of profitability, was 15.1%, up from 13.37% in 2022.
Meanwhile, the fully-loaded CET1 capital ratio, which measures financial resilience, was 12.3% versus a target of higher than 12%. This shows the company ended the year with a sufficient buffer of high-quality capital to absorb potential losses.
Its diverse global operations served it well. There was strong growth in Europe, which the bank said “more than offset the increase in provisions in North and South America.”
Finally, Santander has increased its payout ratio (the proportion of earnings distributed to shareholders) from 40% to 50%. This meant FY23’s payout was nearly 50% higher than the previous year.
For 2024, the bank is targeting mid-single-digit revenue growth and RoTE of 16%. A €1.5bn share buyback programme also started on 20 February.
Huge Latin America opportunity
While all this is positive, rate cuts are widely anticipated this year. So there’s a risk that the boost to earnings from higher interest rates may have peaked.
If so, I wouldn’t expect another 19% rise in the share price over the next 12 months.
Longer term, however, I’m bullish on Santander. It has an extensive branch network across Latin America, where demand for financial services is tipped to grow for decades.
Indeed, in 2021, around 122m people aged 15 and over in Latin America still lacked access to everyday banking services, according to World Bank figures. So this remains a significant long-term opportunity.
Would I buy Santander shares today?
My issue here is that the dividend yield is only around 3.9%. I could invest in a FTSE 100 tracker fund and aim to bag the same yield without taking on the individual stock-specific risks.
Moreover, HSBC is yielding 7.5% right now. Like Santander, it also has attractive long-term potential in emerging markets that are underbanked. So I’d rather keep buying HSBC shares today.
