Banco Santander (LSE: BNC) (NYSE: SAN.US) sadly lost Emilio Botin, the man who turned Santander from a small lender into the biggest bank in the eurozone, last month. But with his daughter Ana having taken over to become the fourth generation of the family to run the company, the markets are expecting continuity rather than any dramatic change.
And though the shares have been slipping back a little in recent weeks, it’s been largely in line with the FTSE 100.
Modestly up this year
At 570p, Santander shares are 8.4% up since the start of 2014. That might not sound a lot, but against a FTSE that’s fallen 3.3% it’s a positive move — and I see every likelihood that the shares will maintain their advantage until the end of the year.
Santander’s dividend is set to fall this year and next, judging by the current consensus of forecasts, but moving towards a more traditional dividend model has to be a good thing in the long run.
In the past few years the bank has been paying 9% and more, but that has not been justified by earnings and has been possible only because many shareholders have taken scrip rather than cash. But the printing of new shares leads to dilution of future earnings, and an increasingly international bank needs a less parochial policy.
Recovery continuing
Earnings per share look set to rise, with gains of more than 20% forecast for this year and next — on top of last year’s 75% rise, it looks like we’re firmly on for a recovery from the year-on-year slide that characterized the recession years.
At the halfway stage, commercial revenues were up 5% with costs rising by only 1%. Non-performing loans were down again, with lending, deposits and mutual funds all up, and capital ratios were still heading in the right direction.
The forecasts put Santander shares on a forward P/E of under 12 this year, dropping to around 9.5 for the year to December 2015.
Staying ahead
And though there doesn’t seem to be much appetite for banking shares right now, I think the Santander share price should stay ahead of the index — I really don’t see the downside needed to close the current gap.