The search for a new CEO at Banco Santander SA (SAN), which had morphed into a soap opera, is now over. The incoming leader, Héctor Grisi, is a company man who joined the ranks as its CEO in Mexico in 2015, explains Benj Gallander, value investor and editor of Contra the Heard.

Grisi has also been responsible for Santander’s North American business since 2019 and is credited with making it the most profitable of the group last year. He will take over from CEO José Antonio Alvarez on January 1. Happy New Year!

There is still some fallout from Santander’s attempt more than three years ago to appoint Italian banker Andrea Orcel as CEO, only to withdraw the offer when his pay expectations were deemed excessive. That resulted in a very public and messy legal battle, in which Orcel was granted an initial victory, but Santander is appealing. A final resolution could be years away.

This important new hire also comes at a time when Santander is looking for growth opportunities in Mexico, where it is mulling an acquisition of the consumer banking business of Citigroup (C) — Citibanamex. Citigroup started talking to interested buyers in January, and it could take a few quarters before the top bidder is named.

Citibanamex, which Citigroup acquired for $12.5 billion in 2001, is Mexico’s third-largest consumer bank, but it has struggled to compete. Analysts have estimated it could sell for a significant loss, between $4 billion and $8 billion. Whoever “wins” this sweepstakes will have to address the firm’s troublesome cost structure before it can turn the enterprise around.

In late April, Santander reported a gush of earnings. Net profit rose by 19 percent, with Europe up 30 percent on stronger lending income. The bank has worked to become more efficient, and interest rate hikes in Britain and Poland bumped the bottom line.

Despite the good European performance, analysts were more interested in inflationary effects on the bank’s cost structure in Latin America, and weaker lending volumes and margins in Brazil — a key market, where net interest income gained 20.5 percent and accounted for a quarter of the bank’s profits.

Santander’s presence across Europe and the Americas is its strong point, and these numbers reflect how strength in certain countries can offset weakness in others.

SAN is on track to meet its 2022 profitability target, thanks to solid performance in the Americas and a rebound in Europe. This despite the fact that, since the financial crisis, Europe has been a tough environment for lenders. Those persistently low interest rates forced the bank to aggressively cut costs and endure persistent lending challenges that generally yielded low net interest margin opportunities.

A final cash dividend of €0.0515 per share was made, on top of the €0.0485 already paid. The bank stuck to its policy of distributing 40 percent of underlying profit to owners, split evenly between cash and buybacks. Hitting its profitability goal for this year will help with these payouts.

Back in January, we mentioned that SAN’s price was volatile and had got ahead of itself. Indeed, the chart has looked positively spiky. There is a buzzy battle going on between buyers and sellers. Renewed fears of stagflation have taken hold, but we are concentrating on the long term, and this one remains on our Buy list.

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