Banco Santander (BME:SAN): Exploring Valuation After New UK Edge Explorer Account Launch

Banco Santander (BME:SAN) is turning heads again, this time thanks to the launch of its Edge Explorer current account by its UK arm. This new offering, packed with cashback, a linked savings component, and diverse perks like family travel and phone insurance, appears to be a clear effort to carve out a stronger competitive position with everyday banking customers. For investors tracking the bank’s strategic moves, this could represent a meaningful attempt to grow market share in a crowded UK retail space.

This kind of move follows a period of energetic share performance for Santander. The stock is up an impressive 97% over the past year, and momentum has hardly slowed. Returns over the last 3 months reached 26%. Against a backdrop of steady revenue and net income growth in the latest annual results, new product innovations could be seen as leveraging that operational strength into expanded retail banking prospects.

After such a strong run in the share price and renewed retail banking initiatives, is the market already pricing the future growth into Banco Santander’s stock, or could there still be value left for those who look a little deeper?

Most Popular Narrative: 96% Overvalued

According to kapirey, the prevailing narrative highlights Banco Santander as significantly overvalued compared to its estimated fair value. This analysis is rooted in detailed, user-driven assumptions about the company’s future growth trajectory and profitability.

Catalysts

• Banco Santander is present in Europe (Germany, Austria, Belgium, Denmark, Spain, Finland, Isle of Man, Italy, Norway, Poland, Portugal and the UK), North America (USA, Mexico), South America (Argentina, Brazil, Chile, Uruguay).
• Active customer base: 103 million.
• ONE Transformation Project: transformation to an integrated digital model for all markets. Every year they change the name of the digitization and integration project, but it does not end up materializing in better results in online banking.
• In 2025, the objectives are to maintain capital revenues of 62,000 million, increase commission income to mid-to-high digits, reduce costs in euros, cost of risk of around 1.15%, RoTE of over 17% (approximately 16.5% post-AT1), and CET1 of 13%.
• Fiscal years 2025-26 share buybacks worth 10,000 million (capitalization on February 5, 75,000 million). Buyback estimated at approximately 13.33% of capitalization. Profitable mergers or acquisitions are not envisaged.

What if the bullish consensus is missing something? There are bold revenue, margin, and profit multiple assumptions powering this eye-catching target. Curious to see what’s behind such a dramatic disconnect between the market price and the narrative’s fair value? Uncover the specific financial projections and rationale that drive this striking valuation call.

Result: Fair Value of $4.43 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, shifts in global interest rates or stronger-than-expected digital execution could quickly challenge the consensus that Santander is significantly overvalued.

Find out about the key risks to this Banco Santander narrative.

Another View: DCF Model Suggests Undervaluation

Taking a look through our DCF model gives quite a different perspective. This approach points to Banco Santander being undervalued at current levels, which is in stark contrast to the overvaluation flagged earlier. Could one of these methods be missing something crucial about the bank's future prospects?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Banco Santander for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Banco Santander Narrative

Of course, if you think a different story is hidden in the numbers, you can dig into the data and craft your own take in just a few minutes with Do it your way.

A great starting point for your Banco Santander research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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