28-oct-09 neha gaddam, lorna hajdini & omar...
TRANSCRIPT
Neha Gaddam, Lorna Hajdini & Omar Khedr28-Oct-09
Agenda• Introduction• Thesis• Financial Analysis• Q&A
ThesisWe need to invest in Banco Santander because:
Highest expected growth in Brazil
U.K. also a primary driver for volume growth
Global presence and increasing network
One of the best performing banks in the world
A Snapshot of Santander• In 2008:
– 3rd largest bank in the world in terms of profits– 7th largest bank in terms of stock market
capitalization– Attributable profits of $ 8,876 bn (+9% )
• Excluding extraordinary income
Geographic DiversificationContinental
Europe United Kingdom The Americas
Profit = 32%of STD Group
Profit = 54% of STD Group
Profit = 14%of STD Group
Profits by Line of Business
Brazil
Outlook on BrazilConsumer credit markets are expanding
Credit amounts to only about 50% of GDP, compared 169% in the U.S.
• 29% ROE, • 2.9% RoRWA• LatAm operations offer:
• higher NII and lower costs• *LTD is 104, lot of scope to grow
*LTD – Loan to Deposits
Potential in Brazil: Key Statistics
Santander and Brazil: Profits
IPO: The Aftermath
Benefits as a shareholder
Maintain high dividend payout
Increase book value per share
U.K.
UK a driver for volume growth
2004
Jul 08
Sep 08
UK: A Driver for Volume GrowthTotal Net Income divided by geographic region
Europe55%
LatAm24%
UK21%
NI 2009
Europe54%
LatAm32%
UK14%
NI 2008
UK: A Driver for Volume Growth• The Abbey Network reported a net profit
increase from £849 million to £1.16 billion (YTD in 2009)
• UK divisions net profit (total): £ 2.14 Billion • a 37 % increase from last year.
• Abbey collected more than £ 2.7 Billion deposits
UK a driver for volume growth
Liquidity Analysis Jun-09 Dec-09 Jun-08
Total Loans/Total Deposits 160.31 164.88 187.21
Total Loans/Total Assets 60.68 59.49 61.35
Total Deposits/Total Assets 37.85 36.08 32.77
Total Deposits/Funding 53.39 46.69 45.49
1. High capital base: • Core capital increased from 6.7% to 8.5% • Capital from the IPO of $8bn • High interest from SWFs
2. RoRWA is third best in Europe 3. Highest dividend yield (7.6%)4. Pioneer of cross border banking in Europe5. Forecast earnings to grow 34% CAGR ‘08-116. Decreasing LTD
Best Bank in the World
Best Balance Sheet
• Recurring profits in spite of the downturn– $6.7bn ytd, 14% annual increase
• Strength of the B/S – Core capital ratio 8.4% – Net Operating Profit 2.4x Provisions
• Generate value to shareholders – BV of Equity increased by 8%– High dividend payout : 54%
Q&A
APPENDIX
Analyst coverage
Sovereign Funds Support
• Examples: – Aabar Investments (Abu Dhabi Investment Fund)
bought a piece of the Santander Brazil for $328M
“We are delighted to have had the opportunity to invest in such a strong and successful entity”
– Qatar Sovereign Wealth raised the stake in the U.K. branch of Santander as well