After being a profit spinner seemingly forever, Banco Santander (SAN) — a favorite conservative idea for 2022 — lost €9 billion in the first nine months last year when the bank made a large write-down of goodwill and deferred tax assets, notes Benj Gallander, editor of Contra the Heard.

This year was a return to old form with net income of €5.8 billion in the first nine months of 2021, the best numbers since 2009. The logic of buying Spain’s biggest bank was similar to that when we purchased shares of Bank of America (BAC) at $6.76.

Our feeling was that it was “too big to fail” and if it had collapsed it would have been a major blow to the country’s psyche and economy. The BAC bet paid off in spades as it was sold as high as $38.79, with dividends to boot.

Banco Santander also pays a dividend, but it is only one-quarter of what it used to be. Increases are likely in the cards. The corporation’s goal is shareholder renumeration of about 40 percent of the group’s underlying profit, with some in dividends and the rest in share buybacks.

Besides Spain, SAN operates in 15 other countries, some in which it has major girth. It is looking to expand in the United States and also Mexico right now along with some other nations.

We trust that anyone hired will not be botched like the deal to employ Andrea Orcel as CEO, also known as the “Lionel Messi of banking.” Upon realizing how much the deal would cost, the enterprise withdrew the offer and Orcel sued winning $76 million. The bank will likely appeal. Lawyers are rubbing their hands. Why does this not sound financially expedient?

Another headwind facing a stock price increase is the growth in share count. At just north of 17 billion, it is not quite double a decade ago. That will also slow dividend growth.

Despite these negatives, Banco Santander is a very important player in both the Spanish and global financial arenas. It was recently named “Bank of the Year in the Americas,” by Banker Magazine.

Ultimately, we feel that SAN has plenty of room to shine, between both capital gains and dividend growth. The bank was purchased in 2020 at $2.05 for the Contra portfolio with an initial sell target of $8.24. Previously it traded above $20 per share.

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