ANALYSIS: With Shanghai losing ground overnight, global market losses yesterday, and the Fed still talking rate rises, is Santander a safe bet?

botin29915Santander boss Botin….reasons to be cheerful?

Another day of the world’s stock markets largely in the red yesterday has been followed overnight by the Chinese SSE Composite dropping over 2%, and the Hang Seng diving 3.3%. Meanwhile, South American tigers continue to sink under the weight of US Fed alleged tapering….and now Yellen yo-yoing on rate rises. Finally, the recent Spanish elections show once more that the country is in serious danger of becoming a sovereign basket case. All these events will impact directly on one bank more than most. The Slog investigates whether Santander’s ebullience is really justified.

News soundbites like ‘Ana Botin Bullish on Brazil and Santander’ always for me come under the heading of “You would say that”.Lest we forget, this is the lady who needed to borrow $7.5bn in new capital within seconds of becoming CEO. That’s only a billion less than the toxic nuclear reservoir formerly known as Deutsche Bank had to raise. Ooo-er.

The Bank has struck me for years as odd, secretive and lopsided in all kinds of ways: sort of doing that swan thing of apparently gliding swiftly across a millpond, while the brain behind those little eyes knows that a waterfall lies ahead, and the feet are already treading water.

Gung-ho analysts in recent days have designated Banco Santander SA a buy. I beg to differ.

Santander has now failed two stress tests in a row. Its share price has been heading south for much of this year….and its latest phase (below left) looks like a cliff-fall.

santander28915Santander Consumer USA Holdings Inc. (NYSE:SC) has lost 2.16% during the past week and dropped 5.87% in the last 4 weeks. Yesterday it lost 1.72%. Am I the only person seeing all this as a disturbing acceleration?

While the pr spin the bank puts out is never less than upbeat and expansionist, buy/sell ratings analysts have been at loggerheads about whether it’s a ‘buy because it’s too cheap’ stock, or ‘sell because it’s going down the tubes’. It’s all “yes-and-no”. For example, shares of Banco Santander Chile get a Buy-Sell rating of 2.67 on a 1 to 5 scale; while based on a -1 to 1 scale, the sentiment score for Banco Santander Chile based on news since mid 2015 yields a score of 0. It all looks ‘slap bang down the safe middle’, but in reality it isn’t: it’s “we don’t know”.

An important (and unique) core of the bank is of course its Spanish homeland and South American dimension. Last April, Banco Santander´s earnings jumped 32% in Q1 2015, after it recorded improvements in Brazil and Spain. But that was before Yellen’s Fed began to sound bullish on rates: if new family Empress Ana Botin is bullish on Brazil today, it’s time she paid a visit to Specsavers. Banco Santander Brasil’s share price has fallen from 15.4 Real to 12.5 in the last 25 days.
Moody’s yesterday downgraded Santander in struggling Puerto Rico. The island’s continuing economic contraction and fiscal crisis could lead to deteriorating asset quality at the island’s banks it said….Santander’s consolidated non-performing assets ‘are already extremely high relative to their total gross loans and other real estate owned – currently 10.3%’. And on that basis, the Moody Blues downgraded Banco Santander Puerto Rico from Baa2 stable to BCA ba3.
At Bloomberg’s analysis service yesterday, one found this re Santander SA the Group company: ‘No earnings announcements are currently available for BANCO SANTANDER SA’, which I thought odd; but on its own admission, the bank is heavily dependent on the business heartlands, none of which are in good shape. Front-foot and positive as ever, it has been letting leaks float out there that it is ‘aiming to bring its U.K. and U.S. investment banking businesses up to the same strength as Brazil or Spain’ – a clear case to my mind of sounding ambitious and wanting to be designated a ‘buy’ stock.
More accurately in commercial terms, Botin is trying to broaden by territory and diversify by sector because the outlook for Iberiphone non-investment banking is bleak. But for a bank with relatively little pedigree in Anglo-Saxon investment sectors, that looks like an uphill climb.A highly placed UK investment source told me late last week, for instance, that Santander’s British operation “has safety ringfencing that just isn’t up to it given what’s coming down the road.
Given the apparent (albeit unconvincing) determination of Janet Yellen to raise rates ‘this year at some point’, I think it is fair game to have concerns about a go-for-it bank firmly attached to a region that will suffer more than most from the US Fed’s down-the-rabbit-hole view of life. Ana Botin is in the middle of a medium-term shake-out designed to give Santander a more solid footing. I have a hunch that short-term reality will intervene to scupper her plans. If so, it will be messy…and very probably a domino-pusher.
We shall see.

21 thoughts on “ANALYSIS: With Shanghai losing ground overnight, global market losses yesterday, and the Fed still talking rate rises, is Santander a safe bet?

  1. John, I think what the lady from Santander was saying, although not very clearly, was that Santander Brazil was a good buy, not only because she expects the share price to rise, but because she also expects the Real to improve against the US$. The BRL has taken an absolute beating against the dollar over this year losing almost 50% of it’s value, so with the share price being in Reais, that is a cheap buy in anyone’s pocket if they are dollar users. Even if the share price goes down in Reais some more the currency must at some stage bounce a little back like it did over the last week thus making the stock more valuable in dollar terms… And anyway, as the main indexes go south for the winter, what else is there to do?


  2. Santander has upset a lot of it’s easy as 1 2 3 customers with the recent standing charge increase from 24 to £60 year. Given that the UK is a major profit stream for the group, and that ‘ customer loyalty ‘ is one of their declared mantras…many customers must now be looking to make the leap and find a safer more attractive yield.


  3. is there any bank not bankrupt except for politicians actions. they are black holes sucking the life out of everything around them.


  4. Sounds like PC hoss shit to me pal. In any case they are using a very high tech electrolytic device which they sure as hell did not make on the Afro savanna. In short, what they are doing is a making a crude fuel cell which in all likelihood produces about the same amount of power ‘out’ as ‘in’. The fuel they are using is about the only home grown product that can be verified in any case.
    I doubt that MIT should be looking to their laurels over this one.


  5. A few weeks ago I came across a business idea to make a small amount of money importing something quite light and possible to send through the post across Germany to expats. I went through the Google Trends in fact and found that the search term itself was declining in use in Germany. I also did some research and found that for about 100 quid of stock purchased one made 163 quiddies revenue, not considering any tax stuff. To me that wasn’t actually worth the hassle. I even went as far as setting up a Paypal account, my own free hosting and free domain to sell online. Now I ask, has anyone else trodden down this route? Many of the books/sites I read tend to be overenthusiastic and well, to “American” to fit our European mindset.


  6. Ric,say what you like about santander price increase its still the best by miles,i,m still netting over $400 P/A.OF COURSE IF YOU KNOW OF SOMETHING BETTER:-) CAPS sorry.


  7. Have been saying to anyone who’ll listen (not many will!!) that a similar end game awaits in the UK.

    Economy implodes, house price bubble pops, banks go bust, depositers ‘bailed in’, government and BoE step in to ensure the depositers ‘bail-in’ is enough and the banks start repossessing at ultra low prices. And then rent them out to the serfs at rents no one can afford but, guess what, the government provides housing allowances.,,,paid for by the very people who have been stitched up by the banks in the first place.


  8. I notice the story originates in Nigeria? Could another version of send me some cash for investment and I will repay you ten-fold.


  9. Alan, I think that you have a point there. I can only see one problem. Housing benefit is capped at ?? if it was not to be capped then the idea would work, but people in work paying taxes would then find that their taxes would rocket to pay for Housing Benefits.
    A simplistic idea would be a property tax on all property of 1% paid by the owner of the property. That way if the Banks foreclosed on the loan. They would in effect become the owner and would have to pay 1% of their property portfolio to the Local/national Governments. This plus the scrapping of tax relief on interest paid on loans [BTL etc] Also as Property Tax would not be eligible for tax relief would result in a housing market re-alignment to peoples actual incomes.


  10. Late to the game, but Santander have just axed their share dealing service. Very good it was too. Wonder why; then perhaps I am safer out of their parish, in spite of trustees etc.


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