Shares in Santander(LSE: BNC), Europe's largest bank by market capitalisation, often get overlooked because they are not exciting enough.
However, while the bank's slow and steady approach to business may not be exciting, it does mean that the group has been able to avoid many of the problems its European peers have suffered and is now one of the world's dominant players.
Santander's global presence has not always worked in its favour. The group was able to avoid the worst of the financial crisis, thanks to its exposure to emerging markets, specifically Brazil which today accounts for one-quarter of overall earnings. Unfortunately, as Europe has recovered over the past five years, Brazil has struggled, and so has the firm's US division.
But it now looks as if these problems are behind the group, and for the first time in around a decade, Santander seems as if it has entered 2018 firing on all cylinders.
At the end of last year, the US Federal Reserve finally lifted a ban imposed in 2014 on the group's US holding company, or subsidiaries, from paying dividends or making any capital distributions. This followed a dividend payment of $52m from Santander Consumer USA to the US parent that reportedly violated restrictions put on the bank following a failed stress test earlier in the year.
Now this headwind is behind the company, management believes the US division is at a "turning point" and expects 2018's performance to be much better than 2017's. The US arm will also benefit from tax reform, the savings from which management is planning to reinvest in new loan growth.
As well as an improved trading performance in the US this year, I believe we will see a continuation of the economic recovery in Latin America, which helped Santander report a 26% increase in net profits for Brazil last year.
Despite tensions with the US, a broad-based global economic recovery has inspired economists to increase their estimates for economic growth in Brazil and Mexico this year and next over the past few months, and this should have a positive impact on Santander's performance in these two key countries.
A blowout year
Considering all of the above, I believe 2018 is set to be a blowout year for the Santander share price. City analysts have pencilled in earnings per share growth of 8% for 2018, followed by an increase of 11% for 2019.
To me, these figures seem to be too conservative. Indeed, last year the company produced reported earnings growth of 8.7%, and it had none of the positive tailwinds listed above behind it.
With this being the case, as the year progresses, I believe City analysts could revise their forecasts for growth higher. And if they do, shares in Santander could leap higher as they are currently trading at a relatively undemanding forward P/E of 10.8.
Analysts are expecting the company to announce an 87% increase in its full-year dividend per share to 19.3p giving a dividend yield of 4.1% at current prices.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.