Strategic trade
Trade view / 02 September 2015 at 8:09 GMT

#SaxoStrats: Banco Santander to take upside turn

Head of Equity Strategy / Saxo Bank
Denmark
Instrument: SAN:xmce
Price target:
Market price:

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Background

Banco Santander has taken a 15% hit on shares in the year-to-date to make it one of the worst European banking stocks in 2015, but a close look at the growing loan book and an improving Spanish economy suggests this could turn.

Valuation hits 2013 levels… with P/B ratio at 0.84x down from 1.34x on average in 2014 which again is at odds with a rising return on equity. Second-quarter results were solid and the bank is diversified enough to withstand the temporary weakness in Latin America on the back of the improvement in the Spanish economy.


Management and risk description

Parameters

Entry: at market.

Stop: trailing stop at €4.49 with in steps of €0.08.

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Banco Santander's five-year rollercoaster

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Source: Saxo Bank

— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more

4y
JOSHUA63 JOSHUA63
Incredible just shorted santander because of Brazil, Spanish election etc
4y
Peter Garnry Peter Garnry
We believe the decline has already priced in those two factors. Besides is the Brazil exposure partly hedged out in our portfolio by our short Citigroup position.
4y
Peter Garnry Peter Garnry
Btw, Podemos popular vote has declined for over a year now as the Spanish economy has significantly improved...
4y
Peter Garnry Peter Garnry
Spanish unemployment rate SA is at 22.2% down from 26.3% in March 2013...
4y
Jazzy Jazzy
I am still long. Please make an update like above, i like that! thank you Peter
4y
DupreL DupreL
What effect will exposure to Abengoa have on Banco Santander outlook?
4y
Peter Garnry Peter Garnry
@Jazzy, we have closed our Banco Santander trade as the "pain trade" in commodities will likely continue to hurt LatAm longer than we initially anticipated which will hurt Santander (45% of revenue from LatAm region). In addition we are getting increasingly worried about their Common Equity Tier 1 ratio in the light of further ECB QE which could push Santander to do a capital raise in 2016/17...

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