SAN - Santander share price outlook after its half-year earnings
2024-07-24 04:01:00 ET
Santander (BME: SAN) share price continued its strong rebound on Wednesday as investors reacted to the company’s financial results. It has risen for three consecutive days, reaching a high of €4.65, its highest point since June 11th. Also, the stock has jumped by 8.80% from its lowest point this month and by 33% from its lowest level this year.
Banco Santander earnings
Banco Santander, the third-biggest Spanish company with a market cap of over €77 billion, has done well in the past few years. It is also smaller than Inditex, the parent company of Zara, Oysho, and Lefties, and Iberdrola, a renewable energy company.
The company operates in some countries like Spain, Brazil, Mexico, and the UK. It operates in five key businesses like retail, consumer, corporate & investment banking, wealth management and insurance, and payments. Its payment solution is made up of companies like PagoNxt and cards.
Santander, like other European banks, has done well in the past few years, helped by the actions by the European Central Bank (ECB). The ECB has hiked interest rates from zero a few years ago to a record high of 4.50%.
Banco Santander published encouraging financial results on Wednesday, helped by its Spanish and Brazilian businesses. Its profit rose by 20% in the quarter to over €3.2 billion, bringing the half-year figure to €6.1 billion.
Its net interest income rose by 12% in the first half of the year to €23.45 billion while fee income rose by 6% to €6.4 billion. Most of its business did well in the last quarter, with retail NII rising by 12% and its CIB, wealth, consumer, and payments rising by 22%, 13%, 7%, and 10%.
Another important driver for Santander’s business was low interest rates in Brazil, where the central bank has delivered several cuts this year. Unlike in other countries, Brazilian banks benefit from low rates because they are passed immediately to deposits.
Santander strong forward outlook
Therefore, the company expects that its business will beat its targets for the year. It expects that its revenue will rise by high-single digit growth while its efficiency rate will be b42%.
Also, Santander hopes that its CET1 ratio will be 12% this year while its Return on Tangible Equity (RoTE) will be higher than 16%.
The company’s business has been improved because of its technology tools and its product simplifications. For example, the company recently improved its efficiency by slashing about 320 jobs in the United States to leverage its technology. In a statement, the company’s CFO said :
“The combination of the business model, number of customers and digitization is structural, and this is independent of the level of interest rates, so we believe the positive momentum clearly will go into 2025, and that is why we have upgraded some of our targets.”
The case for Santander stock
Analysts believe that the Santander share price has more upside to go. For one, the company is doing well, with its revenue and profitability growth continues.
Also, the management has been working to simplify its operations by selling some of its non-performing assets. For example, in 2019, the company sold its retail and commercial banking division in Puerto Rico in a $1.1 billion deal.
It also sold it distressed loan portfolio to Cerberus, a private equity company, and Axactor. And earlier this year, the company sold 300 million euros worth of hotel loans to Polus Capital Management. It is also considering selling more real estate loans. These exits have left behind a leaner and more profitable company.
Meanwhile, the company has continued to reward its shareholders. In February, the company increased its dividend per share by 50% and initiated a 1.5 billion euros share buyback. It now has a dividend yield of 3.8%.
The company is also a bit undervalued with its price-per-book multiple of 0.7, lower than other European banks like Unicredit and Lloyds Bank. It is also cheaper as it is trading at a P/E ratio of 6.5, lower than the IBEX 35 multiple of 10.6.
Santander share price forecast
The daily chart shows that the SAN stock price has been in a tight range in the past few weeks. It remained between the support and resistance points at €4.28 and €4.52. It then made a bullish breakout after its financial results.
The stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA), a bullish sign. Also, the accumulation and distribution (A/D) indicator has risen to its highst point since June.
However, the stock’s volume has been falling after peaking in October last year. Therefore, the Santander share price will likely continue rising as buyers target the key resistance point at €4.89.
The alternative scenario is where it resumes the downward trend and retest the key support level at €4.28.
The post Santander share price outlook after its half-year earnings appeared first on Invezz