Bull of the Day: Banco Santander (SAN)

As a prelude to this Bull of the Day scenario, I can recall several European bank stocks that have traded at depressed levels of $10 a share or lower in recent years and have now more than doubled to new peaks of around $20 or higher.

Some of these ADRs include Barclays BCS, Deutsche Bank DB, and Spain-based BBVA BBVA, also known as Banco Bilbao Vizcaya Argentaria. Ironically, Banco Santander SAN could be the next European bank stock to join this list as not only the largest bank in Spain, but the biggest international bank in Latin America.

Keeping this scenario in mind, Banco Santander stock currently sports a Zacks Rank #1 (Strong Buy) and should be attracting the attention of bulls and value investors.

The Top Performer in a Blazing Industry

At the moment, the Zacks Banks-Foreign Industry is currently in the top 27% of over 240 Zacks industries. Starting to post more robust earnings, European bank stocks have stood out in particular, driven by higher interest income and cost-cutting measures. Banco Santander has led the way by further fueling investor sentiment with aggressive stock buybacks and dividend increases. 

Hitting a new 52-week high of $10 a share, Banco Santander’s ADR has soared over +120% in 2025. Still, relative to its peers, especially BBVA, Banco Santander stock is making the case for more upside.

Operational Improvements & Positive EPS Revisions

Year to date, Banco Santander’s profit is up 11% from the first nine months of 2024 to $11.52 billion. Signaling efficient capital use is that Banco Santander’s return on tangible equity (RoTE) has climbed to new peaks of 14% and edges the industry average of 12.7%.

Most influential to its strong buy rating is that in the last 60 days, fiscal 2025 and FY26 EPS estimates are up over 2% and 5% respectively. Furthermore, Banco Santander’s EPS is now expected to leap 21% this year and is projected to increase another 8% in FY26 to $1.09.

Banco Santander’s Attractive Valuation

Making the trend of rising EPS revisions more attractive is that Banco Santander stock still trades at a reasonable 10X forward earnings multiple, which is well below the benchmark S&P 500’s 25X and a slight discount to its industry average of 11X.

Plus, SAN trades at par with the industry average of less than 2X sales compared to the S&P 500’s 5X, with Banco Santander expected to bring in more than $70 billion in annual revenue for the foreseeable future.

Stock Buybacks & Dividend Increases  

Planning to return at least $11 billion to shareholders through buybacks and dividends from its FY25 and FY26 earnings, SAN currently has a very generous 1.88% annual dividend yield for a stock that trades at $10. While this is slightly below the industry average of 2.32%, Banco Santander’s yield does top the benchmark’s 1.07%.

More intriguing is that Banco Santander has increased its dividend eight times in the last five years, with a very impressive annualized growth rate of 48.71% during this period. It’s also noteworthy that Banco Santander’s 21% payout ratio indicates there is plenty of room for more dividend hikes in the future.

Bottom Line

Despite an impressive performance this year, Banco Santander’s cheap stock price reflects that its ADR is still flying somewhat under the radar. To that point, these massive shareholder returns are being funded by record capital generation as Banco Santander’s Common Equity Tier 1 ratio (CET1) has hit a new high of 13.1%.

With the CET1 ratio being a clear measure of a bank’s financial strength and resilience, it's even more promising that Banco Santander added 7 million new clients during Q3, showing strong global growth with over 170 million customers worldwide.

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This article originally published on Zacks Investment Research (zacks.com).

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