A troubled outlook for the UK economy has prompted me to adopt a cautious tone when it comes to discussing many of the banking sector's biggest players like Lloyds, Barclays and Royal Bank of Scotland.
In the current climate, banks with significant foreign exposure are worth their weight in gold. And while I am bearish on plenty of its peers, its exceptional global footprint straddling developed and emerging markets alike makes me extremely optimistic about the investment prospects of Banco Santander (LSE: BNC).
That is not to say that its vast overseas exposure has seen it having it all its own way in recent years. Macroeconomic turbulence in Latin America in particular prompted earnings turbulence as Santander sources around 45% of aggregated profits from that region.
Foreign markets still improving
But supported by a recovery across South American economic powerhouse Brazil, the earnings picture on this continent, and therefore that of Santander, looks exceptionally rosy. Attributable profits there surged 27% in the first quarter, and improving economic conditions, combined with the relatively-low take-up of banking products, still leaves Santander with plenty of business to go for.
But Santander is not totally immune to the troubles in our own marketplace, of course. Its UK division, from where the bank sources just over a tenth of group earnings, saw attributable profit sink 21% during January-March.
However, it can remain optimistic about the health of its other European businesses to keep group profits to keep on jumping. Robust economic conditions in Continental Europe helped profits there move 21% higher in Q1, with Spain recording a 26% year-on-year improvement.
The terrific progress of all of Santander's non-UK operations enabled it to ride out the troubles on these shores and report a 10% year-on-year improvement in group attributable profit in the first quarter, at EUR2.05bn.
Brilliant Value, stunning dividends
It should come as little surprise that City brokers are expecting earnings to maintain their northwards charge in the medium term at least, with current forecasts suggesting bottom line rises of 6% in 2018 and 11% in 2019.
And as my Foolish colleague Peter Stephens recently pointed out, the Footsie business can be considered a brilliant bargain based on analyst forecasts, the business sporting a forward P/E ratio of just 8.1 times.
What's more, this bright profits outlook, combined with Santander's ever-improving balance sheet, supports predictions of bulky dividends through to the close of next year. In April's bubbly trading statement, the bank also noted that its CET1 fully loaded capital ratio improved to 11% as of March from 10.84% at the end of December, and 10.66% a year earlier.
The Spanish business is expected to lift the dividend from 22 euro cents per share last year to at least 23 cents in 2018, matching chief executive Ana Botin's target made back in the spring. Furthermore, in 2019 a 27 cent payment is forecast by the Square Mile, and it is the year in which Santander is also pledging to revert to paying full cash dividends instead of the three cash/one scrip dividends per year offered right now.
These estimates mean it carries jumbo yields of 4.8% and 5.9% for 2018 and 2019 respectively. I fully expect dividends to continue shooting higher too, with earnings for many years to come given its exceptional progress across the world. I believe the bank has what it takes to make investors a fortune in the years ahead.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. 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.