U.S. Markets closed

Banco Santander to Take Impairment Charge in Q4, Goal Intact

Zacks Equity Research

Banco Santander, S.A. SAN recently conducted a review of its goodwill. Accordingly, the company’s board of directors agreed to make adjustments to the goodwill and change the composition of the Group.

As a result, the bank will have to take a net impairment charge of nearly 600 million euros in its fourth-quarter 2017 results. Of the total impairment charge, approximately 500 million euros are related to the company’s investment in Santander Consumer USA Holdings Inc., which has resulted in a reduction in its earnings compared with prior years.

Although the impairment may have a negative impact on the company’s profits in the fourth quarter, the Group’s CET1 ratio will not be affected because goodwill is not included while calculating the same.

The company also mentioned that it has closed the sale of the 100% share capital of Allfunds Bank, S.A. The sale is a part of the Banks’ agreement, which it had made earlier in 2016 to acquire 50% of Santander Asset Management from Warburg Pincus and General Atlantic. The agreement is expected to close before the end of 2017.

After including the 300 million euros of net gain that comes from the sale of capital of Allfunds Bank, the deal is expected to lead to a reduction in the company’s CET1 ratio by 9 basis points in the fourth quarter.  

Notably, despite these changes, Banco Santander remains confident about achieving its near-term goals. The company remains on track to increase its dividend per share in 2017 and 2018. Additionally, it maintains its goal of increasing 2017 and 2018 earnings per share (EPS) by double digits.

Hence, following the news, shares of the company gained a little more than 1%.

In the past year, the company’s shares have rallied 47%, outperforming 23.3% growth of the industry it belongs to.

Currently, the stock carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the same space are KB Financial Group Inc. KB, Banco Santander-Chile BSAC and Banco Macro S.A. BMA.

KB Financial’s earnings estimate has been revised 11.1% upward for the current year over the last 60 days. In the past year, the company’s share price has been up 54.3%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Banco Santander-Chile’s earnings estimate for the current year has increased 1.7% over the last 60 days. The stock has risen 32.1% in a year. It currently carries a Zacks Rank #2 (Buy).

Banco Macro’s earnings estimate has remained stable over the last 60 days. The company’s shares have rallied nearly 46.3% over the past year. It also carries a Zacks Rank of 2.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Banco Santander, S.A. (SAN) : Free Stock Analysis Report
KB Financial Group Inc (KB) : Free Stock Analysis Report
Banco Santander Chile (BSAC) : Free Stock Analysis Report
Macro Bank Inc. (BMA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research