Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Banco Santander: 1 of the Best International Banking Stocks

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Foolish investors may want to make room for international stocks in their portfolios to mitigate some of the risk posed by a U.S. economy grappling with inflation and severe  default anxiety. I think I've found one solid stock that can do precisely that.

Banco Santander (NYSE: STD  ) is one international banking stock that's been delivering encouraging signals. Despite the fact that Spain looks to be in much worse shape than the U.S. (and threatens banks' balance sheets), Santander's impressive performance nonetheless compels me to remain bullish about it.

Strong earnings
In its latest quarter, the bank saw growth of 5.5% in its net interest income and an 11.5% jump in its net fee income on a year-on-year basis. In addition, a 10.2% decline in provisions for loan losses helped boost net operating income after provisions by 7.9%. For an investor, these signs are undoubtedly encouraging.

Personally, I'm looking for relatively cheap stocks with good dividend-paying capacity. But I am not willing to compromise on stability and growth. Keeping all this in mind, let's put Santander through the wringer and see how it fares.

Evaluating profitability
Return on equity (ROE) is a crucial metric that evaluates the profitability and efficiency of a stock. Santander's net income grew on a sequential basis, but ROE decreased ever so slightly to 11.7% due to increases in common stock. That 11.7% meets my minimum expectations for a company of this type, but not by a huge margin. So far, so good, moving on.

Stability and yields
Recently, the company's Tier 1 capital ratio reached a decent 10.9%, reflecting its strong equity position and sound financial health. Comparable Banco Bilbao's (NYSE: BBVA  ) Tier 1 ratio is 9.8%, while Bank of Ireland (NYSE: IRE  ) stands at 9.7%. That should give you some idea of the quality of the bank's assets.

Among banking stocks, Santander is sporting a very attractive yield right now. The payout is surely among the best of its comparables, with an attractive current dividend yield of 9.1%. Banco Bilbao, another Spanish bank, offers a yield of 7.80%.

The Foolish bottom line
I have discussed Banco Santander's aggressive growth strategy in detail in previous articles. Looking at its strong fundamentals, Santander looks like an attractive stock for long-term investors who focus on a company's ability to grow and generate profits without having a steep share price (in Banco Santander's case, a P/E ratio under 10 and a P/B under 1.0). What say you, Fools? Please scroll down and use the comments section to let us know.

Fool contributor Zeeshan Siddique does not own any of the stocks mentioned in the article.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1507150, ~/Articles/ArticleHandler.aspx, 10/24/2016 9:51:25 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 35 minutes ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:03 PM
SAN $4.84 Up +0.17 +3.64%
Banco Santander Ce… CAPS Rating: *****
BBVA $6.96 Up +0.17 +2.50%
Banco Bilbao Vizca… CAPS Rating: ***
IREBY $0.00 Down +0.00 +0.00%
The Governor and C… CAPS Rating: **