Banco Santander for my pension?
The top 8th bank in the world, Spanish Banco Santander, is a faster growing bank than most of the worldwide banking giants such as Citigroup and HSBC and I should know, because I used to work for them!
The Forecast p/e is around 7.5 next year, so that would surely have a positive effect on the price if earning per share targets are met. Return on equity is at 17.3 % TTM, which seems low by UK standards, but they have remarkably improved upon their 5 year average of 12.6 and will have plenty opportunity reducing it further, given their cost cutting expertise and determined and singular focus on retail banking. It seems they really focus on being an expert in one area, and they sell any other businesses that doesn’t fit in, like Abbey’s life division, usually at a price Santander are delighted with. Future cost reductions include the introduction Santander’s IT platform, Partenon, which should reduce costs and increase sales further at Abbey in the UK. They have 40Bill USD in shareholders equity and EPS of 1.31USD. Their current pe is around 10, below the industry average. Market cap is with 33,294,166 of revenue. They made 6,763,293 in income after tax and a net margin of 32.4% against the industry 26.9%. Both revenue growth and profit margin growth are good and can be considered to be high for the industry. Sales growth for most recent quarter was 22.7 compared to industry of 28.3, but TTM was 35.6. EPS growth has been good at 36.4 compared to 31.1 for the industry. They seem to have a very low tax rate of under 20% which is a concern, as tax rates can rise. Shareholder Equity is showing steady growth. Number of shares outstanding is 6,254,297. Their ROA is lower than average. Liabilities are at 769,328,438 and assets at 809,106,914, with 70 billion for sale. Price/Revenue is $4.40 and I should check if this is too high and why. Eps is 1$ an that increased from 0.72$. Because of the consistently higher growth rates, I believe this bank has better growth potential than the UK banks, even although their prices recently dropped. Furthermore, considering the UK economy’s growth could slow, as according to Santander, it may be of benefit to have a more worldly diversification including South America. Santander has some exposure to the US, but not a great deal, so with US debt high and with the potential of USD assets to fall in value, it seems like another good reason to back this bank. Abbey will earn about 1 billion euros in 2006 and between 1.2 billion euros and 1.25 billion euros in 2007, Botin said. On June 7, Santander said it agreed to sell Abbey’s life- insurance units to Resolution Plc for 3.6 billion pounds. The bank says it’s focused on transforming Abbey from being a mortgage lender into becoming a full-service retail bank
Santander’s Botin Predicts a 13% Rise in 2006 Profit (Update4) June 17 (Bloomberg) — Santander Central Hispano SA, Spain’s largest bank, expects 2006 profit to rise 13 percent to a record 7 billion euros ($8.85 billion) because of cost cuts in the U.K. and higher sales in Latin America, Chairman Emilio Botin said. The bank, the fourth-biggest in Europe, also expects to report profit before extraordinary items of 6.5 billion euros, Botin told investors at an annual meeting in Santander, Spain, today. Santander posted record net income of 6.22 billion euros in 2005 and 5.21 billion euros excluding one-time gains. “2006 is going to be another excellent year,'’ Botin said. The bank will pay this year’s first dividend on Aug. 1 and it will be 15 percent higher than last year, he said.
Santander, led by Botin since 1986, is wringing cost savings from Abbey National, the U.K. mortgage lender it acquired in 2004. The bank is also increasing sales in Latin America, which accounts for more than a third of profit. Acquisitions will only be made if they extend Santander’s retail and consumer banking businesses, 71 year-old Botin said. “It’s more a moment for sales than purchases,'’ he said in an interview. Botin seemed to indicate he is focused on completing the restructuring of Abbey and won’t be distracted by making other major acquisitions for now, said Javier Bernat, an analyst at Caja Madrid. Botin has spent more than $40 billion on acquisitions, building a bank with market value of 66 billion euros, from 8.3 billion euros in 1995. On June 1, Santander said it completed the $2.4 billion purchase of a 19.8 percent stake in Sovereign Bancorp Inc., extending the bank’s U.S. business. Santander said yesterday it bought shares worth $125.4 million to increase its stake in the Philadelphia-based lender to 21.1 percent.
Morgan Stanley raises Santander (STD) target price to EUR14.5 from EUR12.5 amid upgraded EPS forecasts of 5% for 06 and 7.5% for 07. Expects 20% earnings growth over next 3 years. Notes shares trade at 20% discount to European peers. “Don’t worry about future acquisitions,” brokerage says, as risk is over-discounted. Keeps buy rating. The chairman stated that he thought the bank was undervalued. He’s usually stuck to his word, so I’m not doubting it right now.
Would Warren Buy – Yes, well maybe. At least, I wouldn’t be embarrassed mentioning this one to him. OK, it’s a consistent possible 20% growth stock, lets see if I can find a 30%er. Anyway, I’m going to invest £3000 (approx USD 5800)