Spanish banking giant Banco Santander (NYS: STD) has been bouncing around 52-week lows recently, and I decided to give it a once over to decide whether to close my poorly performing CAPScall or let it ride. A SWOT -- strengths, weaknesses, opportunities, and threats -- analysis should help shed some light on the bank's prospects.
The bank has globally diversified operations. Only 12% of its profit is generated in Spain. Operations in Brazil, Mexico, Chile, Germany, Poland, the United Kingdom, and the United States account for the vast majority of profits.
The bank already meets the European Banking Authority's core capital requirements for June 2012.
Santander has publicly listed part of its stakes in Banco Santander Chile (NYS: BSAC) and Banco Santander Brasil (NYS: BSBR) . If it needed to raise capital, Santander could sell another slice of operations unaffected by European debt worries.
Its shares look cheap, recently changing hands under 60% of book value.
The trailing-12-month dividend yield tops 13%.
It's a bank, in Spain.
Nonperforming loans have been trending up for several quarters largely due to the Spanish market.
Although loan-loss provisions across the group increased last quarter to 62% of nonperforming loans, provisions for the Spanish market are less than half of those nonperforming loans.
The low price-to-book value and high dividend yield mentioned above mean the market is concerned that Santander may need to raise capital or cut its dividend.
Santander recently opened new opportunities in China when its Shanghai branch was licensed to deal in renminbi.
Financial trouble in Europe may offer opportunities to pick up assets or banking operations at fire-sale prices.
Banco Santander's emerging market operations allow it to benefit from growth in Brazil and the rest of Latin America.
Financial trouble in Europe pretty well covers the threats.
Overall, Banco Santander's discount price seems fair considering the weaknesses in Europe. The loan-loss provisions seem a little on the low side given the weak home economy and growing number of non-performing loans. If I were making a call today, I'd pass. Since I already have a CAPScall, I'll keep it open and see how Banco Santander plays out.
Add Banco Santander to My Watchlist.
Add Banco Santander Brasil to My Watchlist.
Add Banco Santander Chile to My Watchlist.
At the time thisarticle was published Fool contributor Russ Krull doesn't have a position in any company mentioned. You can follow his CAPS picks here. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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