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Santander (LSE: BNC) shareholders are certainly enjoying 2025 so far. The bank stock has jumped by a very impressive 61.5% year to date, outperforming all its UK peers in the process.
Indeed, it’s up 27.3% in just two months, powering to an 11-year high after the early-April sell-off. This means anyone who invested £10,000 in Santander shares just two months ago would now have £12,730 on paper.
Not only that, a dividend was paid last month, which would have added another roughly £166 to the mix. Nice.
Very impressive Q1
Santander operates in 10 core markets across Europe, the US, and Latin America. This geographical spread served it well in Q1, as strong performance in Spain, Poland, and the US offset weakness in the UK, Mexico, and parts of Brazil.
Revenue rose 1% year on year to €15.5bn, with the bank adding 9m new customers, bringing the total to 175m. There was a 19% increase in net profit, which reached a record €3.4bn. Adjusting for a one-time Spanish bank tax last year, the growth figure would have been 10%.
Impressively, Santander’s non-performing loan ratio fell below 3% (2.99%) for the first time in more than 15 years. And the full-year dividend was hiked by 19%.
Santander has also been buying back a load of its shares. Since 2021, it will have spent €9.5bn on buybacks and repurchased 14% of its outstanding shares.
Looking ahead, Santander is on track to meet its 2025 targets, which include €62bn in revenue, mid- to high-single-digit growth in net fee income, and a return on tangible equity (RoTE) of about 16.5%.
Fintech rivals
One risk here is the Latin American markets where Santander operates. Granted, they have great long-term growth potential, but they can also be very volatile. For example, Argentina is recovering from hyperinflation, while Mexico is suffering from tariff-related uncertainties.
Plus, Santander is facing rising competition in Latin America from nimble fintechs like Nu Holdings (Nubank) and MercadoLibre. The latter has applied for a full banking licence in Mexico, Brazil, and Argentina.
MercadoLibre recently announced: “We are building the largest digital bank in Latin America. In a region that still faces challenges in accessing quality services, we want to change the way users interact with the financial system with a digital bank where everyone wins.”
Finally, Santander is operating in an environment of falling interest rates. This is expected to put a bit of pressure on its net interest margin, which is how much the bank will earn from lending money after paying interest on deposits.
Should I buy Santander stock?
Turning to valuation, the stock’s trading at just 8.1 times forecast earnings for 2025. So it doesn’t appear overvalued on this metric.
However, the dividend yield is not particularly high after the share price’s 61% rise this year. The forecast yield is just 3.4%, which is less than I can currently get from cash.
Overall though, I’m very impressed with the Spanish bank’s progress. As a long-term Santander account holder myself, I think this is an excellently run company.
I still think the shares might be worth considering for long-term shareholders. However, I already have exposure to the Latin American financial system through large holdings in Nubank and MercadoLibre. So I’m happy with those stocks for now.
