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Should I Buy Barclays PLC (ADR) (BCS) or Banco Santander, S.A. (ADR) (SAN)?

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LONDON — Both Barclays PLC (ADR) (NYSE:BCS) and Banco Santander, S.A. (ADR) (NYSE:SAN) were casualties of the credit crunch, but unlike Lloyds Banking Group PLC (ADR) (NYSE:LYG) and Royal Bank of Scotland Group plc (ADR) (NYSE:RBS), both have avoided the humiliation of large-scale state bailouts and cancelled dividends.

Barclays PLC (ADR) (NYSE:BCS)

Indeed, Banco Santander, S.A. (ADR) (NYSE:SAN)’s 10.8% prospective dividend yield is one of the highest available from any company with a London listing, and is around five times greater than Barclays PLC (ADR) (NYSE:BCS)’ 2.2% forward yield.

However, there is more to a share than its dividend yield, so which of these two banks looks like the better buy today?

Barclays vs. Banco Santander
I’m going to start with a look at a few key statistics that can be used to provide a quick comparison of these two companies:

Barclays Banco
Santander
Market cap 42,036 million pounds 50,520 million pounds
Dividend yield 2% 10.8%
Price to book ratio 0.81 0.71
12 month share price change 81% 29%

Although Barclays PLC (ADR) (NYSE:BCS) and Banco Santander, S.A. (ADR) (NYSE:SAN) have similar market values, they are very different businesses.

Santander’s profitable U.K. and Latin American businesses have helped it maintain strong free cash flow over the last five years, and fund its 0.60 euro annual dividend, which has been unchanged since 2009.

U.K.-focused Barclays PLC (ADR) (NYSE:BCS) was forced to cut its dividend in 2008 and 2009, and while the payout is starting to rise again, last year’s 6.5 pence payout is only half of the 11.5 pence paid in 2008.

On the other hand, Barclays PLC (ADR) (NYSE:BCS)’ share price has risen by 81% over the last 12 months, while Banco Santander, S.A. (ADR) (NYSE:SAN) has only gained 29%, because of investors’ concerns about Santander’s exposure to the troubled Spanish economy.

What’s next?
Although Barclays’ recovery appears to be going well, it’s worth noting that the British bank has net exposure to Spain of 23.8 billion pounds, including 13.6 billion pounds of residential mortgages. If the situation in Spain worsens, both Barclays PLC (ADR) (NYSE:BCS) and Banco Santander, S.A. (ADR) (NYSE:SAN) may suffer further losses.

In the meantime, what can we expect?

Analysts’ forecasts are notoriously unreliable, but FTSE 100 companies generally get the benefit of the most comprehensive analysis, and tend to deliver fewer surprises than smaller companies.

With that in mind, let’s take a look at some forward-looking numbers for Barclays and Santander.

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