Friday, January 21

Banco Santander will stumble in 2022 for Brazil

Banco Santander shares will close 2021 with a rise of 16 percent, but will lag behind the 31 percent that BBVA earns, or the 68 percent of Banco Sabadell, the leader of the stock exchange among financial entities.

In a year of ups and downs in the stock market, the entity chaired by Ana Botín will use a fund to recover the psychological level of three euros per share. Its best catalyst is the 25 percent discount the stock is trading at.

On the contrary, one of the great challenges that the bank will have to face next year is the deterioration of the business prospects in Brazil, where the group obtains 24 percent of its net income.

The prospects for the Brazilian economy in the medium term are very complicated, due to the lack of tangible reforms and an external environment that will not be particularly favorable. In addition, in 2022 there are presidential elections, which always increases uncertainty.

The Brazilian market picked up all these uncertainties with falls of 11 percent for the Ibovespa index, which will sign its worst year since 2015.

Caution at Banco Santander

In his analysis on Santander Bank, Credit Suisse analysts remain “cautious” about the downside risks posed by “the deterioration of the economic outlook in Brazil.”

Specifically, the Swiss bank’s economists believe that there will be “strong increases” in interest rates in Brazil to contain high inflation.

This more restrictive monetary policy “could hamper the growth of the volume of credit due to the contraction of consumption and investment.”

For this reason, analysts estimate that the bank’s net income in the country will decrease next year by between two and three percent.

In addition, rising inflation will translate into increased pressure on costs, as seen at Barclays. In his opinion, the cost of risk will increase slightly, especially in the last quarter of the year.

Electoral uncertainty in Brazil

One of the biggest challenges posed by the Brazilian market is the presidential elections to be held in 2022.

“We have a cautious outlook for Brazil,” as the elections “raise the possibility of policy adjustments that create additional uncertainty,” Ed Kuzcma, manager of Blackrock, told

The problem is that political uncertainty poses “a downside risk for the Brazilian real,” which, in turn, hampers more flexible fiscal support, Credit Suisse argue.

In the short term, the Swiss bank’s strategists believe that the Brazilian currency will trade with a high political risk premium that will limit the upside potential of the real.

With a weaker currency, the consequence is that Brazil will have a weaker fiscal position next year, which drives the budget deficit and puts further downward pressure on the currency.

“This raises our caution regarding the exposure of Banco Santander in Brazil, since a depreciation of ten percent in the real would have a negative impact of two percent in the profits of 2022”, they predict in Credit Suisse.

Banco Santander gets stuck in the attack at 3 euros

The final stretch of the Banco Santander stock market has not been particularly bright either. The price has not been able to touch the three euros throughout December, a psychological area that analysts consider essential to accelerate the comeback.

In the opinion of Josep Codina, director of analysis of the magazine INVESTMENT and of, for the price to go to a side scenario, it would have to close the gap between 2.92 and 30.3 euros.

The problem is that the price has a key support at 2.88 euros, a sort of precipice the bank was able to dodge on several occasions but which is just over 1 percent away.

If this support is lost, the minimum target for falls for Banco Santander’s securities is the March and April lows, at 2.75 euros.

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