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13/11/2008 Extension of Capital of Banco Santander
To analyze the convenience or not of an investment in a Bank, and more of the characteristics of Banco Santander by its size, is quite complex for that reason there are much analysts who them usually do not consider in their analyzes. Bestinver for example has been time informing of which it does not have Bank within his portfolio. In any case, we are going to try to analyze Banco Santander like investment, but not from an attempt of valuation of the bank, but from the risks that maintain according to their present structure.
Taking the Annual Report from 2007 like game, we are going to see in the first place the numbers fundamental of Banco Santander and soon to analyze as they are the possible risks:
- Credits to Clients 565,477 MM€
- Own bottoms 51,945 MM€
- Attributed benefit 9,060 MM€
The possible risks that can affect to that each of their areas of business would be:
- Santander Consumer Finance, that is the area specialized in the financing to the consumption and that supposes 8.09% of the total of Credits and 7.94% of Beneficio. Their main businesses are the financing of automobiles in concessionaires and personal loans and according to the report describe 2007 like difficult by the stagnation in the sale of automobiles in Europe. Its number of business comes from Germany in a 36% and Spain in a 28%, being the rest very diversified. Nevertheless it describes like good the results of the branch of the USA and the new openings in Mexico, Russia, Chile, France and Finland. Given the present conjuncture we have to say that the credit to the consumption usually is the one that reaches higher rates of dilatoriness reason why it is to wait for a worsening of the numbers.
- National Abbey, bank of the United Kingdom acquired by Banco Santander. It supposes 32.55% of the total of Credits and 13.26% of Beneficio. They describe the good year as and makes special developing emphasis in the hypothecating market where it is in top 3 of UK and the implantation of the business of credit cards. Until now we have not had the news of problems in the organization, but we would have to be asked; if the leader in UK in Hypothecating Market HBOS and the leader in Financial Services Lloyds Tsb is with true problems, For which Abbey does not have any? In the report the interest takes shelter to develop both businesses during 2008. If it has been thus and the conjuncture is being more adverse of the awaited thing, it must not also have problems Abbey National.
- Banco Santander in Latin America. The business in Latin America is centered in three countries where its presence is important that they are Brazil, Mexico and Chile. The business generated in these three countries supposes 9.06% of the volume of credits and 23.20% of the benefit. In this case, the risk comes because the main commercial partners of the three countries are Spain and the United States that are suffering of significant form in the present crisis. This slowing down could affect to the exports of these countries and therefore the branchs of Banco Santander.
- Banco Santander in Spain. It operates through two marks essentially, Santander and Banesto, supposing between both, 33.75% of the total of Credits and 27.31% of Beneficio. In this case the majors risks which it faces are the great operations of financing to the promotional sector. We finish attending refinancings of Reyal-Urbis and Metrovacesa. In addition, according to we have been able to read in press, are acquiring immovable of promoters who cannot do against their payments by hundreds of million Euros. The refinancing of these loans is not the solution (solution of Spanish organizations), as it is not it either the acquisition of assets because they are overvalued (value of the floors).
- Banco Santander as global organization has in addition multitude to other areas of business that without being important in volume, is it as far as served like the divisions of Wholesale Bank, Management of Assets or Credit cards. All of them have the inherent risks to their activity and the present situation, but by its small weight on the total, they would not have to affect the organization of significant form.
All these questions would have to make us fear for a good evolution of the action in the short term. In addition it is only necessary to pay attention to since the great proposals of Banco Santander like the Convertible Bonds have gone last that are more of a 60% down. It does not sound either well that three weeks ago they said that did not need money to them and announce the extension now; For us too many questions.
However, if we acquired action with vision of long term, if we see good perspective because the positioning of Banco Santander is good by its geographic diversification, but do not know how long can suppose this. In addition a worsening in the present situation can affect to him negatively, mainly considering its aggressive attitude at the beginning of the crisis acquiring other organizations.
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