More Mexico, less UK … but at the right time

Santander is not afraid for 2021. Continued attacks of the virus and delays in vaccination programs have raised expectations of economic recovery in suspense – especially in Europe – Ana Botan-run bank feels optimistic Improve your ratings for training, Which means doubling the high betting already launched last February, when the figures for the previous year were released.

If the group had forecast ROTE figures (fixed capital gains) of 9 to 10%, it would have indicated that this Friday’s Santander final figure should be 10% higher than analysts estimated. In hard money, this means cost, according to the calculations of Ultra analysts, net profit 6,200 to 6,300 million At around 6.8 billion, the figures again distort the market’s calculations.

Under these circumstances, the Bank of Spain is encouraged to announce the possibility of repurchasing unrestricted shares in its subsidiary (8.3% of capital) in Mexico for approximately 5 550 million, indicating 24% premium compared to price Of the Mexican sect. The move comes a day after a series of cuts in the United Kingdom that put it on the bank desk, signaling the closure of 20% of its offices in the country and the exit of about 600 employees.

Santander justifies improving its orientation in the most favorable environment in the United Kingdom

While one or the other movement does not seem to be important enough to change the bank’s story, they appear to be the result of the bank’s management’s clear commitment, which includes putting too much weight on Mexico, which could be detrimental to the British market. Re-balancing, with a very short-term perspective, May be debatable: Economic recovery forecasts in the UK today are much more convincing than in Mexico in 2021 and 2022. In fact, the bank has justified improving its ratings for this year, among other reasons, by the fact that the market is largely favorable on the larger European island.

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But any attempt to broaden the outlook on the past and future allows enough arguments to be found to conclude that this is a “meaningful” movement, as most analysts who have spoken about it agree. . Santander’s recent history is often marked by long-standing disappointments in the United Kingdom, while Mexico, from secondary to, has played a continuous expansionary history. Assume 7% of normal profit To 11% in three years in the group (over the same period, the UK weight has been halved, from 16 to 8%).

Santander: It is a very harsh fact to give free rein to beliefs

Value added

In an environment of high competition and low interest rates, the British market has recently added all the uncertainty associated with the Brexit process, calling for it to leave a long-term trail of growth potential. Mexico, on the other hand, has proven its ability to generate sustainable and highly profitable growth for many years (its normal ROTE By the end of 2020 it will have surpassed 14%, Compared to 3.85% in the United Kingdom) and its high connection to the US economy, the chances of its recovery are again higher than in Europe. Companies like JPMorgan estimate Santander’s Mexican division up to 14% higher than the British company, which is 7 times the profit of 2023, the worst value after Argentina.

Mexico has a huge attractionOr, given that it has good fundamentals and a more efficient economy in the banking business. The group seeks to make more profit in economies where there is not so much pressure in terms of interest rates, and unlike Mexico, which is under pressure, they point to Norfolk.

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The purchase of a minority stake in Mexico, once carried out, would raise Sander’s return by 1% per share at the expense of a small impact of 8 basis points on the capital, while the return on investment It may rise above 14%, Alantra estimates, above equity price. Bestinver suggests that a similar move could be anticipated in Brazil, which controls 90.5% of the shares (even if the company estimates that acquiring a minority stake in the Brazilian business will result in higher prices and greater impact).

The move could raise expectations of a similar move in Santander Brazil

One question, after BPVA’s recent experience, may be raised to the extent that the group poses a risk by increasing its exposure to emerging markets, but given the limited performance and strong weight that Sandander will continue to maintain in the developed markets (JB Morgan expects the bank to create 60% adjusted in 2023 in Europe and the US More than), we must add The growing mix of the bank De Ana Botan has always been viewed with great confidence by experts, despite the undeniable problems that countries like Brazil have gone through – still facing.

About 2.5% increase was recorded by Santander shares in the middle of the session – this Raise their income by more than 15% In 2021 – These Friday announcements seem to be the best evidence that investors have been favored. More Mexico and less the UK seems to be a fair formula that should pay off that company in the long run.

However, the continued rise in the stock market is more dependent Positively planned view This Friday it becomes clear to the eyes of investors and the best profit expectations in analysts ’ratings seem to be possible. It is, probably, more dependent on the United Kingdom than Mexican trade.

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Santander is not afraid for 2021. Continued attacks of the virus and delays in vaccination programs have raised expectations of economic recovery in suspense – especially in Europe – Ana Botan-run bank feels optimistic Improve your ratings for training, Which means doubling the high betting already launched last February, when the figures for the previous year were released.

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About the Author: Morton Obrien

"Reader. Infuriatingly humble travel enthusiast. Extreme food scholar. Writer. Communicator."

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