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David Herro On Banco Santander

June 29, 2010 | About:

David Herro of Oakmark commented on the European situation earlier this month. In particular, he has the following assessment for Spain’s Banco Santander (STD):

Using this approach allows us to add good quality businesses at attractive price points to our portfolios. An example of this tactic is our investment in the Spanish bank, Banco Santander. This bank has been on our radar for a long time and, in our view, Banco Santander ranks among the highest quality global financial firms that exist today. Some attributes that have led to this assessment are:

Santander is one of the most profitable banks in the world

We believe Banco Santander is one of the best run banks as measured by total shareholder return, tangible book value per share growth, operational efficiency (C/I ratio), and importantly, by its astute capital allocation. Santander has one of the best track records among its peers with regard to acquisitions and integration. The bank delivers a very good dividend yield, has a solid capital position, strong NPL coverage, robust funding base and, very critically, an extremely profitable business model.

While Santander is the largest commercial bank in Spain, it isjust a Spanish Bank

Santander has excellent geographic diversification and has a significant global presence. In the past Spain and Portugal accounted for half of Santander’s business. Today Spain and Portugal together represent just 31% of its net income and just 27% group value. Over the past decade, management has internationalized the group and Santander is now among the top five market positions and has double digit market shares in Brazil, Chile, Mexico, and the U.K. Plus the bank has a good foothold in the U.S. via its acquisition of Sovereign Bancorp.

We believe Banco Santander can easily earn its way through expected difficulties in Spain and elsewhere. Fears over debt issues in Spain caused the bank’s share price to become recently undervalued (falling 40% YTD) to a level that allowed us to buy shares.

Read David Herro’s complete commentary.

Rating: 3.9/5 (11 votes)


Halis - 7 years ago    Report SPAM
This is an unusually good bank that I've been looking at also. It just takes so much time to study a financial stock.
Graemew - 7 years ago    Report SPAM
Emilio Botin, the CEO of Santander is recognised in Spain as a financial genius. He is probably the shrewdest banker in the world today. The equivalent in the banking world to Rupert Murdoch in the media. However, I sold my shares in Santander about two months ago when the sovereign debt issue began to get ugly. I began to worry that Santander could be holding large amounts of Spanish government debt and that the value of this debt could be seriously compromised should Spain have difficulty financing the government deficit...and even default. Since I have no expertise in banking I don´t know how to assess the amount of sovereign debt that Santander is holding. If I thought this risk was low I would happily buy back Santander, now at a lower price than I sold it. Can anyone offer any expertise here?
Lrm21 - 7 years ago    Report SPAM
STD has been screaming value buy for a few months now, but I have yet to pull the trigger, primarily cause I still feel we have another leg down, and I have been very hesitant about financials.

STD does not have the backstop in Europe that Americans banks enjoyed during the 08 meltdown.

I think until the sovereign defaults are brought forward I maybe on the sidelines with regards to Euro banks.

Here is an interesting article in todays WSJ, that also raises some interesting questions, such as in fact STD position more precarious then they are letting on, and is all the buying their doing simply to shore up there capital position or dare I say it make them too big to fail.

Santander Puzzles Investors

Stock Falls as Bank Goes on Buying Binge; a Sign of Strength or Fleeing Spain's Travails?


Superguru - 7 years ago    Report SPAM
"_Here is an interesting article in todays WSJ, that also raises some interesting questions, such as in fact STD position more precarious then they are letting on, and is all the buying their doing simply to shore up there capital position or dare I say it make them too big to fail."

Or like Bank of America did here in US, it is time buy assets on cheap and grow. And STD has cash position to take advantage of current situation and things are not as bad as they seem.

In US, sky was falling at one point and now people have even started forgetting all about it.

I have no insight into STD.

Disclosure: Long STD because of its non Spain assets.
PHILCIR - 7 years ago    Report SPAM
If I'm not mistaken, dosen't Herro work w/ Nygren? WAMU anyone. These guys are going for a repeat. Nygren loved Kerry Kilinger -- Herro loves STD's management. What a joke!! Herro nor does anyone else have a clue what this bank got mixed up in. My belief is that Santander is Spain's version of Citi. Plus Craemer was a a big bull on this stock before it cracked in 2008. Enough said. Wouldn't touch it -- but Nygren doesn't mind w/ OPM of course. Verdict -- Stay Away.
Jose Vasquez
Jose Vasquez - 6 years ago    Report SPAM
I advise extreme diligence and carefulness investing in Santander. Be aware of the bad and ugly things, I am a long term Spanish investor and I strongly urge you to not oversee the not so nice sides of this story: http://investing.kuchita.com/2011/06/15/banco-stantander-the-good-the-bad-and-the-ugly/

Here is how I am currently hedging my Santander positions:http://investing.kuchita.com/2011/06/30/hedged-200-santander-stocks-with-2-call-options/



Disclosure long: http://www.kuchita.com/view/sumo.php

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