What’s Telling Me To Buy Banco Santander Plc Today

Royston Wild considers the investment case for Banco Santander plc (LON: BNC).

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Today, I am looking at Banco Santander (LSE: BNC) (NYSE: SAN.US), and assessing whether to deposit some of the company’s stock in my personal stocks portfolio.

An excellent choice for Latin American exposure

Question marks have been raised over the effects of economic cooling in Banco Santander’s key markets of Latin America. But if, like me, you believe that recent turbulence in these territories represents nothing more than a mere blip in an otherwise compelling growth story, then the bank could be just the ticket to provide spectacular returns.

The bank derives just over half of total profits from Latin America, with continental heavyweights Brazil, Mexico and Chile making up 25%, 12% and 6% of group profits respectively. Although Banco Santander announced in July’s interims that net attributable profit from Latin America fell 11% in January-June, to 919m euros, customer demand remains bubbly and loans and deposits actually rose 6% during the period.

Indeed, loans and deposits across all emerging markets actually rose 12% during the first six months of 2013. This bodes well for future growth, particularly as performance in the key European regions of the UK, and especially Spain, remains patchy.

Also notable during the period was an upgrade in the bank’s core capital ratio, which rose by 0.44 basis points to 11.11%. Meanwhile, its loan-to-deposit ratio rose to an “unprecedented” 107%. In my opinion, a vastly improved Banco Santander is primed to enjoy fresh resurgence looking ahead.

Earnings ready to rocket again

City forecasters expect earnings per share to surge 88% in 2013, to 43 euro cents, with a further 25% advance expected next year to 54 cents.

Based on these projections the bank provides stunning value for money, with a P/E rating of 13.1 for 2013 and 10.5 for 2014 just above the value benchmark of 10 times prospective earnings. As well, Banco Santander also sports a price-to-earnings to growth (PEG) readout of 0.1 and 0.4 for these years, well within bargain territory below 1.

And City analysts expect blistering dividends to underpin the massive shareholder returns potentially on offer. Banco Santander has kept the dividend on hold at 60 cents for several years now, and although forecasts expect the full-year payout to fall to 59.3 cents and 53.3 cents this year and next, these payments carry yields of 10.2% and 9.2%. This far outstrips the 3.2% FTSE 100 forward average.

Bankable advice from a financial legend

While I consider Banco Santander an excellent choice for the savvy stock picker, legendary investment guru Warren Buffett has picked out another High Street giant ready to turbocharge returns from your hard-invested cash.

The Motley Fool’s “One UK Share that Warren Buffett Loves!” report spells out this fantastic opportunity just waiting to be snapped up. The company in question boasts great dividend and earnings growth potential, and our exclusive report gives the lowdown on the firm’s investment appeal. Just click here for your copy — it’s 100% free and comes with no further obligation.

> Royston does not own shares in Banco Santander.

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.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »