The shares of Banco Santander (LSE: BNC) (NYSE: SAN.US) dropped 20p, or 4%, to 533p during early London trade this morning after the market took a sceptical view of the bank's 2012 results and maintained dividend.
Santander, which claims to serve 102 million customers throughout Europe, South America, Mexico and the United States, today announced it would declare a EUR0.60 per share annual payout for the third year running.
The dividend, equivalent to 52p per share, provides a 9.6% yield for current buyers.
Santander's dividend announcement accompanied full-year results that boasted pre-provision profits climbing 2% to EUR23bn. However, the figures also revealed provisions for non-performing loans surging 28% to EUR13bn, and a further EUR4bn write-off relating to Spanish property values.
The charges caused overall earnings to plunge 59% to EUR0.23 per share and leave the dividend uncovered.
Emilio Botin, Santander's chairman, said: "Profits reached a turning point in 2012. In 2013, with the exceptional write-offs behind us, we should see a marked increase in earnings, based on the group's recurrent revenues and cost control".
If Santander's financial performance of 2010 were to be repeated during 2013 -- that is, with loan provisions of EUR10bn and no Spanish property write-offs -- then near-term earnings could rebound to EUR0.94, or 80p, per share.
Such a recovery would put the shares on a possible P/E of less than 7.
Santander's latest balance sheet carried net assets of EUR80bn, equivalent to roughly EUR7.87 or 677p per share. The shares thus trade on a price to book ratio of 0.79.
Of course, whether Santander's write-offs, its valuation plus the general outlook for the banking sector all combine to make the share a buy remains up to you.
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