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Santander: Seeking new rationale for cross-border retail model

Covid-19 has hit the Spanish lender particularly hard, but the pandemic could spur a longer-term strategic shift.

José Antonio Álvarez
Santander chief executive José Antonio Álvarez

Santander’s geographic spread matched with painful exactness those regions and countries hardest hit by Covid-19: Spain, the UK, Brazil and the US.

Partly because of this, its shares underperformed every other big bank in Europe over the year to its third-quarter results, falling to a 30% discount to book value.

This is a big change even from two years ago, when Santander was one of the continent’s highest-valued banks, trading at a 30% premium to its book value. Is a post-Covid turnaround at hand?

A goodwill impairment charge of €12.6 billion and loan loss provisions of €3.1 billion led to a loss of €10.8 billion in the second quarter, but Santander bounced back to a profit of €1.75 billion in the third.

After the third-quarter results, a better-than-expected loan loss of €2.5 billion and a pledge to cut another €1 billion of its costs in Europe over the next two years, KBW and long-time Santander bears Berenberg upgraded their recommendations on the bank to hold.


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