Naturally, SAN’s 2012 numbers were not great. Results were depressed by a €6 billion provision for real estate losses in Spain. That is unlikely to be repeated, so I would expect earnings in 2013 to improve from 2012’s €2.6 billion by over 120%. That should take 2012’s 25x P/E to 12x in 2013 and to below the 10x mark by the end of 2014. Even if the bank looks expensive when trading at 1.3x tangible book value, I believe that there is upside ahead. Even if Spain continues to underperform the world economy, as it is expected for 2013; I expect the financial normalization that started in mid 2012 to continue this year. Its clear to me that we will not see a Euro breakup any time soon. European political leaders made it clear that the Euro is here to stay and Spanish bond yields already reflect such developments (ten year yields came down from over 7% to 5%). As stated in a previous post, for the first time in a long time I am buying individual stocks. I already made two Spanish related bets SAN now and Telefonica that is expect to reinstate its dividend by early next year, last week. Time will tell. At least I put my money where my mouth is.
The article Santander’s Dividend Is Sustainable originally appeared on Fool.com and is written by Federico Zaldua.
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