Santander risks

There is no shortage of published risks about Santander. Some are valid, other are at best rumors, at worst manipulations.

First the bad:

• Spain will leave the €
  phantasm, the € is mainly a political achievement, and even if it happens it will be not killing for Santander because the subsidiaries are responsible for their own liquidity. Beginning of 2014, Latvia joins the €. 
• Spain will default
  Spain did default in the past as result of war defeat, they are to proud to do that when not forced, anyway the situation is not that bad and is quickly improving. Even in case Spain defaults, Santander has put a limit on the sovereign exposure.
• Cyprus: the money will flow out of the Spanish banks
  Cyprus reinforced the trend of deposit flow into Santander Spain, as fly for quality
• Santander will be forced to make fire sales
  reality: since 2008 the acquisition/disinvestm... are strongly positive
• Brazil is crashing
  The NPL in Q2 and Q3 2013 went strongly down and the rate of improvement is accelerating, The revenue (in BRL) is growing above inflation
• Santander is transferring money into Spain from foreign subsidairies
  only in the form of dividends, the rest is phantasm
• Refinanced loans will crash Santander
  Reclassification occurred in Q2 2013, no additional provisions, only €2bi of loans on time for payments had to be classified as -technical- NPL
• The real estate crisis in Spain will kill Santander
  That was really painfull indeed. €6bi of provisions done only for real estate Spain in 2012, so now even the performing loans to companies with real estate purposes are provisioned
• Santander capital is too low. BISIII will kill them
  DTA new regulations puts Santander confortably about the 8% minimum (fully loaded in Jan 2014, so withour utilization of the DTA). In 2014 we will have RWA computation rules at EU level that can be (very) favorable. There are also €4-5bi of additional capital from the next 3 dividends payments as script.
• CEO Saenz legal problems will force him to leave the company and this will cause a major problem
  He did leave the company, but this did not cause any problem
• Spain is in riots, proof of that is that the unemployment is at 27%
  no riots
• Santander is a Spanish company, and because Spain is in crisis the company is in crisis
  Company has good geographical diversification, and this allowed the company to go unharmed through the crisis

Then the sensible

• Dividend cut.
  The key date will be next shareholders general assembly (in March 2014?)
  The best argument against a dividend cut is that Santander management did not cut it.
  The guidance tab give an idea of the future EPS. They do not comfortably support a €0.6 dividend on expanding share numbers. However the gap to reach a 50% cash payout is in the range of 20% of net earnings. This can potentially be covered by growth, because Santander has the capital available. Alternative is shares repurchases.
• Emilio Botin succession. He is born in Oct 1934.