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.
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> Royston does not own shares in Banco Santander.