Citi raises Banco Santander price target to €7.20, retains Buy rating

On Monday, Citi analysts, led by Marta Romero, increased the price target for Banco Santander SA (NYSE:SAN:SM) (NYSE: SAN) shares from €6.60 to €7.20, while maintaining a Buy rating on the stock. The revision follows the bank’s earnings upgrades in several regions, including Spain, the United States, Poland, and Consumer & Corporate (CC), which have compensated for lower-than-expected contributions from other areas such as Brazil and the United Kingdom (TADAWUL:4280).

The new price target reflects a 6% average rise in the bank’s estimated earnings per share (EPS) for the years 2025-2027. This adjustment is partly due to the new capital repatriation commitment announced by the bank’s management for the fiscal year 2024, which includes a planned €3.5 billion extraordinary share buyback. This buyback is expected to yield around 4% and would be paid out in the fourth quarter of 2026 or the first quarter of 2027, in addition to a 25% ordinary payout in share buybacks (€6.4 billion out of the bank’s forecasted 2025/26 earnings, yielding approximately 7%). The bank currently offers a dividend yield of 2.3%, and InvestingPro data reveals it has raised its dividend for 4 consecutive years.

Citi’s revised earnings forecasts are more conservative than the consensus, showing a 4% lower average over the 2025/26 period after accounting for AT1 instruments. The caution primarily stems from projections for Brazil, Argentina, and CC. Despite this conservative stance, the forecasts suggest an average return on tangible equity (ROTE) post-AT1 of 15% over the next three years, allowing Banco Santander (BME:SAN) to build its capital ratios to 12.9% by the end of 2025 and 13.2% by the end of 2027.

In her commentary, Romero noted that Banco Santander’s shares are attractive at approximately 7 times the 24-month forward price-to-earnings ratio and about 1.1 times the 2025 estimated price to tangible book value per share. The bank’s current P/E ratio of 7.78x appears favorable, particularly given its return on equity of 12%. The bank’s performance in various markets has led to this positive outlook, with the expected share buybacks adding to the appeal for investors. Based on InvestingPro’s Fair Value analysis, the stock appears to be fairly valued at current levels. Investors can access detailed valuation metrics and 12 additional ProTips through InvestingPro’s comprehensive research report.

In other recent news, Sanofi (NASDAQ:SNY) reported a significant increase in its financial performance for the fourth quarter of 2024, with net sales rising by 10.3% to 10.6 billion euros and business earnings per share (EPS) growing by 4.1%. The company also announced a 5 billion euro share buyback for 2025, reflecting investor confidence in its strategic initiatives. Meanwhile, Banco Santander revealed plans to invest over $2 billion in Mexico over the next three years, focusing on expanding its digital banking platform, Openbank. Fitch Ratings upgraded Santander’s Long-Term Issuer Default Rating to ’A’ from ’A-’, while revising BBVA (BME:BBVA)’s outlook to Positive from Stable. This led to a similar positive outlook revision for BBVA Mexico and BBVA Peru. Additionally, the global trade tensions have impacted European auto stocks and banks, with significant declines noted in companies like Stellantis (NYSE:STLA) and Mercedes-Benz (OTC:MBGAF). These developments highlight the ongoing challenges and strategic moves within the financial and automotive sectors.

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