Banco Santander – A Large Bank Doesn’t Mean A Good One

Summary

  • Major changes undergoing for the European bank.
  • Recent performance might be too volatile for some investors.
  • Digitalization might be the key for SAN to boost its recently slashed revenues.

Banco Santander S.A. (SAN) is a well-known worldwide bank and built its operations since 1857. The Madrid-based company now has a network of branches worldwide, offering them multiple opportunities. While banks are often seen as a solid and somewhat sure investment for a portfolio, dividend-oriented investors really should look twice before going all-in. Pre-2015 figures were certainly more encouraging, since then, volatility seems to have taken over. The company does have some tricks up its sleeves, with their most recent attempt to build a whole new digitalized platform to scoop a wider customer base, growth might get a kick in the next few quarters!

 

Image by Albert Dezetter from Pixabay

Understanding the Business

SAN started its banking operations in 1857, granting them a good picture of today’s activities. The company built a notorious reputation in some of the biggest banking segments, working in 10 main markets. It is the 1st bank in Europe, deriving 52% of its underlying profit from the region while the remaining 48% comes from the Americas, where they are ranked 3rd. SAN underwent a digital transformation, Openbank, OnePay, and Superdigital to its lineup. In 2018 alone, SAN had 144M customers worldwide, stacking up 34.34B NOI, a 0.1% increase from 2017’s exercise.

Geographically speaking, SAN concentrated 26% in Brazil, 17% in Spain, 13% in the UK and the remaining throughout the world. Employing around 194k workers across their operations, the company now focuses on being the best open financial services platform.

 

Source: Santander’s website – Economic and financial review

Growth Vectors

 

Source: YCharts

Sadly enough, banks are also limited on major growth avenues. While there are multiple ways to grow for them, competition often offers the same products with slight changes. Where SAN can get a head start, continuing on what they started these last few years is the digitalization of their operations. With the establishment of Openbank and ODS, global payments services and digital assets, the company could grow its customer base. This unified platform should put them in a favorable position in order to become “the leading Banking as a Service” platform.

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Disclosure: We do not hold SAN in our DividendStocksRock portfolios.

Additional disclosure: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or ...

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