EQUITY RESEARCH: BANCO SANTANDER, S.A.

Santander, S.A. (“Santander”) is a bank with a worldwide reach, which operates in four segments: Retail banking, Corporate and investment banking, Wealth management and insurance and payment solutions. Santander is a bank with a customer-centric approach, continuously working on trying to understand its customers’ needs and preferences, with a great focus on innovation and digitalisation of its operations by investing in technology and providing innovative digital solutions to its customers. Sustainability is one of its major concerns, which is reflected by the variety of environmentally friendly banking products it offers and the continuous improvement of its sustainable practices in its operations. Santander’s Net Loans and Total Deposits have been increasing since 2018, reaching €996,504 million and €1,162,407 million in 2022, respectively. Furthermore, earnings per share rose 23% from 2021 to 2022, from €43.8 cents to €53.9 cents and the total cash dividend per share for 2022 was €11.78 cents, which grew by 18% compared to 2021. Santander has a strong buy recommendation, with a 2024YE PT of €4.74. Based on the closing price of 30th June 2023 €3.39, this reflects a potential upside of 39.82%, considering a medium risk. This risk assessment considers the impact of the rise of interest rates, as it might lead to record years of net interest income, even in the event of changes in regulation and weaker economic conditions (decreasing disposable income and slower economic growth). The current undervaluation of the stock can be explained by the risk and uncertainty related to monetary policy and the possibility of an economic crisis due to high levels of interest and inflation rates. Nonetheless, in 2022 Santander reached a record attributable profit of €9.6 billion and increased its pay-out ratio from 40% to 50%. The results disclosed in June 2023 and the forecasted financial statements show that 2023 might be even better than 2022, which reinforces the recommendation given.