Santander: Despite Exceptional Results, Future Growth Expected to Slow; Fair Value Estimate Up 7%

Narrow-moat Santander presented robust results for 2023 ahead of our forecasts. Santander's attributable profit saw a 15% increase compared with 2022, beating our forecast by 7% and contributing to an impressive 10% profit CAGR over the past decade. Despite the positive year closure, we believe future results would not be as remarkable as 2023 due to the expected decrease in interest rates. We increase our fair value estimate by 7% to EUR 5.80 per share compared with EUR 5.40 provided previously and keep a narrow moat. We believe that the shares are undervalued. Santander currently trades at 6.5 times earnings compared with 11 times the earnings average of our coverage, providing a 13% return on equity, 50% payout and stable earnings over the past decade.