The Motley Fool

The Santander share price has crashed: here’s what I’d do now

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.

Light bulb with jester hat perched on top
Image source: Getty Images

Over the past 12 months, the Santander (LSE: BNC) share price has dived. Since the end of June last year, the stock has fallen by around 10%, including dividends to investors, substantially underperforming the FTSE 100.

Over the past three- and five-year periods, the company’s performance isn’t much better either. Including dividends received, over the former, the stock has produced an annual return of 5.6% for investors, and over the latter, it’s lost an average of 6.7% per year.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

What’s more, investors who have been patient enough to hold the Santander share price for a decade, have seen virtually no return on their money. Over that period, the stock has produced an average annual return for shareholders 0.3%, compared to a return of 9.5% for the FTSE 100.

To put it another way, since 2009, the business has underperformed the UK’s leading stock index by a staggering 9.2% per annum, even when including dividends to investors.

What’s happened?

This lacklustre performance suggests Santander’s growth has ground to a halt over the past decade, but that’s just not the case.

According to my research, over the past six years, the bank’s net profit has increased at an average annual rate of 13.3%, and earnings per share have nearly doubled from around €0.27 to €0.49. City analysts are expecting Santander to report earnings per share of €0.51 for 2019. Based on this target, the bank is trading at a forward P/E of 7.9, and it offers a dividend yield of 5.8%.

Its share price looks cheap on other metrics as well. For example, it’s trading at a price to tangible book ratio of just as 0.96. Technically, any company that’s achieving a healthy level of profitability should trade at or above tangible book value per share.

The question is, why is the market placing such a low multiple on this highly profitable, growing business?

It seems to me investors are just generally avoiding the European banking sector in general as they’ve been a poor investment since the financial crisis. Ultra-low interest rates have crippled their ability to earn healthy profits, and rising levels of bad debts have forced many of the continent’s largest banks to ask shareholders for more funds.

Fundraising

Santander hasn’t been immune from these pressures. In 2017, the company asked shareholders for €7bn to sort out Banco Popular’s finances after acquiring its domestic rival for the symbolic price of €1 the same year. Despite the capital raise, this deal has been a net positive for the bank and its investors. In Spain, its second-biggest market, net profit jumped 28% to €1.5bn during 2018 as its transformation of Popular started to yield results.

The integration is still progressing with Santander announcing today it has paid €937m to acquire the remaining 60% of Allianz Popular, the joint venture between global insurance giant Allianz and Popular. The combined business been selling insurance to the bank’s customers since 2011 and accounted for around 10% of Allianz’s overall gross written premiums in Spain.

Despite the price tag, I think this could be an excellent deal for Santander as it grows its presence in the company’s home market. I also believe this is yet another sign the stock is undervalued at current levels and could be worth your research time if you’re looking to add an undervalued income play to your portfolio.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.