Banco Santander SA – Value Analysis (XETRA:BSD2) : December 26, 2017

Capitalcube gives Banco Santander SA a score of 68.

Our analysis is based on comparing Banco Santander SA with the following peers – Commerzbank AG, AIB Group PLC, Deutsche Bank AG, Lloyds Banking Group plc, Banco Bradesco SA Pfd, Barclays PLC, Banco Bilbao Vizcaya Argentaria, S.A. and HSBC Holdings plc (CBK-DE, A5G-IE, DBK-DE, LLOY-GB, XBBDC-ES, BARC-GB, BBVA-HU and HSBA-GB).

Fundamental Overview

Banco Santander SA has a fundamental score of 68 and has a relative valuation of UNDERVALUED.

Fundamental Score

Company Overview

  • It’s current Price/Book of 0.83 is about median in its peer group.
  • The market expects BSD2-DE to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • BSD2-DE has relatively high profit margins while operating with median capital turns.
  • Changes in annual earnings are in line with its chosen peers but lags in terms of revenue, implying the company is cost conscious and selective about spending for growth.
  • Over the last five years, BSD2-DE‘s return on equity has declined from above median to around median among its peers, indicating declining relative operating performance.
  • BSD2-DE‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s level of equity capital investment seems appropriate to support the company’s growth.
  • BSD2-DE seems too levered to raise additional debt.

Drivers of Margin

  • BSD2-DE‘s operations benefit from both a pricing and an operating cost advantage.
  • The company’s comparatively high proportion of net interest income (net interest income/total revenues) of 72.62% versus peer median of 53.26% suggests that BSD2-DE‘s lending operations show some differentiation with pricing advantages. Further, BSD2-DE‘s pre-tax margin is also more than the peer median (25.95% compared to 16.45%) suggesting relatively low operating costs.
  • The company’s comparatively low proportion of fee based income (i.e. non interest income/total revenues) of 27.38% versus peer median of 46.74% — suggests that BSD2-DE‘s operating margins are likely to be more volatile. In contrast, BSD2-DE‘s proportion of overhead costs (i.e. non interest expense/total revenues) is less than peer median (48.17x compared to 73.44x) — suggesting relatively low fee-based overhead operations or even room for expanding this part of business.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

Banco Santander SA engages in the provision of banking services for individuals, companies, and institutions. It operates through the following segments: Retail Banking, Santander Global Corporate Banking, and Real Estate Operations in Spain. The Retail Banking segment covers all customers banking businesses, including private banking. The Santander Global Corporate Banking segment involves global corporate banking, investment banking, and markets worldwide including all treasuries managed globally, both trading and distribution to customers. The Real Estate Operations in Spain segment includes loans to customers in Spain whose activity is mainly real estate development, equity stakes in real estate companies, and foreclosed assets. The company was founded on March 21, 1857 and is headquartered in Madrid, Spain.