Banco Santander: Robust End to 2020 and Intriguing Strategy in Payments

Narrow-moat Santander reported attributable net profit of EUR 277 million for the final quarter of 2020, materially lower than the EUR 2.5 billion it reported for the fourth quarter of 2019. If one excludes items of a capital nature, Santander produced an underlying, fourth-quarter 2020 net profit of EUR 1.4 billion, which is still 30% lower than what it reported for the same period a year earlier. Currency weakness had a material impact on the results, on a constant currency basis underlying profit for the final quarter declined by 18% year on year. The 30% decline in the value of the Brazilian real had an especially profound impact. We will revisit our model in due course, but we maintain our fair value estimate and narrow moat rating for the time being.