New section: News - Rating agencies

I have created a new section "News-Rating agencies". 

In "News-Group" I want only the most important group notices. I have cleaned that section (News-Group) from rating agencies changes.

In my opinion rating agencies news are not important for long term investments, because they have too many links with the financial industry.

As a matter of fact, fundamentals's situation in Spain did not change since July 2012, in the sense that all elements to forecast an improvement were available in July 2012. In particular the structural changes were implemented at that time.

So recent Spain (and Santander) ratings upgrades are simply too late, too slow, should they be based on objective data.

This period (July 2012) was so interesting as investor because a lot of money movers were convinced they could break Spain and the EZ. In fact the internal EU politics were complex (at that time and now) and as a consequence perceived as impotent and slow, but I never had any doubt, that should it really be needed, they would act. Please remark I don't consider UK as part of the EU at political level. They are in to control it and twist to own interest, including block.

Draghi's speech in London. That speech is remembered as "ECB is ready to do whatever it takes..." That is not that part I remember: It was done in London in front of the financial community. After saying "ECB is ready to do...", Draghi stopped reading his speech. He took off his glasses, looked at the audience and said "and believe me it will be enough". (even the City knows you don't anger an Italian).

As the most symbolic example of behind the scene activity, at that time, the German constitution was changed, to authorize the German army deployment in Germany itself. (huge for historical reasons. Officially to handle terrorist threads. Real reason: In case Greece leave EZ, and as a consequence occurs a bank run, Germany police would be unable to secure borders and bank branches).
And around same time Shenghen treaty was changed in a way to allow to reactivate borders controls in such a situation.

All this to say that I consider country ratings are irrelevant for long term investment. Rating agencies try to build virginity through this activity (sovereign ratings), whilst their commercial activity is deeply tainted by their customer interests (give good ratings to have future business).

Since Jul-2012, including the dividends, Santander went up 100%+. There is still room to go. Personal target prices are €8 for 2014, €10 2015, €12 2016 (all around year end).
At the basis for this is the opinion SAN will be able to keep its dividend at €0.6 even when all cash and 5% DY is nice (4% net).
The complex way to justify this is in tab "Guidance". This information only covers existing business. "Capital" tab is key to see if there are growth possibilities. "Acquisition" tab is proof that Santander is now bigger than in 2008, having made significant acquisitions in Poland, UK, US and China that more than compensate the sales in Colombia, AM and insurance. However the regulation changes requiring more capital lowers these growth effects.
Another way is: Should €0.6 be unsustainable then management would have reduced it already. In 2 years time of daily news reading about Santander keeping its €0.6 dividend for 5 years, long term sustainability is my best explanation. The only other explanation I read is that Botin wants to proof he has balls (literally, it was in Anglo-saxon economic press and within the English text they used the Spanish word "cojones" for obvious reasons)
Botin is brilliant. Keeping a high dividend in the form of scrip allows Santander to raise €1.5bi capital every quarter, without discount, to use for organics growth and acquisitions starting end of 2014

Keeping a €0.6 dividend when all cash with a 50% payout is a challenge: need net earnings north of €15bi by 2016. Focus on ROE is one part of the effort, with significant operations in Brazil and Mexico. There is the €1.5bi cost cutting effort, including Spanish and Polish restructuring (merge). Organic growth is also very active in UK, Mexico and US. Spain is coming with the raise in deposit market share to translate into more loans. My hope is that Santander will announce a major M&A operation, to use the excess capital they have, starting end 2014, preferably in Germany, but could be also in Austria or any US region other than North-East. All the M&A operations end 2013 to 2014 are not significant: they are small (China, Spain) or capital neutral (China), or capitalized with new share issues (especially the 25% share purchase in Brazil). PSA deal is possibly more significant but will be completed in 2015 only. In case no major M&A possible, then Botin should fall back to a share repurchase program, but this is not in his character.

2016 target (€12), including the dividend gives an additional 100% gain to that date.
However my intention is to start unload 50% of my SAN exposure in the next 4 years (selling same amount each month)
That is a long period, but that slow rate allows me to keep the capital gains tax free.
Also I would not do it without the possibility to reinvest in situations similar to Spain Jul-2012.

The good thing with the current financial world is that there are always similar situation.