Banco Santander (LSE: BNC) (NYSE: SAN.US) is one of the world’s few truly global banks. It was originally a regional bank in Northern Spain. It now has businesses out across Europe, Latin America, North America and Asia. By market capitalisation, it is one of the world’s leading banks. I think it has the potential to be a very good investment.
Trading at book value
Over the past seven years this company has had a rocky ride, with the share price tumbling during the credit crunch, rising and then tumbling once more during the eurozone crisis. Just how cheap are the shares now? Well, the company trades at almost exactly book value. I think this makes the shares a real bargain.
Profitability has taken a knock in recent years, with earnings per share falling dramatically. But it is expected to recover strongly, as the bank’s recovery from the eurozone crisis gathers momentum.
Prior to the credit crunch, Banco Santander was one of the world’s fastest-growing financial companies, as it acquired a range of banks around the globe, building a broad portfolio of businesses across both developed and emerging markets.
Profitability will now surge ahead
This growth went into reverse in 2010, but I am hopeful that profitability, and thus the share price, will now push ahead, as a range of factors coincide: the world economy is recovering, investor sentiment towards banks is warming, and there is a contrarian surge in share prices in mainland Europe. Bad debts are being reduced, the housing market is growing, and interest rates will eventually increase.
As the bulk of its business is as a retail bank and mortgage provider, Banco Santander will benefit from all these trends.
Banco Santander’s share price chart shows a downtrend which bottomed in 2012, and the beginnings of an uptrend. In my view, this might be the ideal moment to buy Banco Santander shares.