Banco Santander (SAN) and Royal Bank of Scotland Group (RBS) Head-To-Head Review

Banco Santander (NYSE:SAN) and Royal Bank of Scotland Group (NYSE:RBS) are both large-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, earnings, institutional ownership, risk, valuation, profitability and analyst recommendations.

Analyst Recommendations

This is a summary of current recommendations and price targets for Banco Santander and Royal Bank of Scotland Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Banco Santander 0 1 4 0 2.80
Royal Bank of Scotland Group 1 3 7 0 2.55

Banco Santander presently has a consensus price target of $6.00, indicating a potential upside of 31.58%. Given Banco Santander’s stronger consensus rating and higher probable upside, research analysts plainly believe Banco Santander is more favorable than Royal Bank of Scotland Group.

Dividends

Banco Santander pays an annual dividend of $0.21 per share and has a dividend yield of 4.6%. Royal Bank of Scotland Group pays an annual dividend of $0.17 per share and has a dividend yield of 2.8%. Banco Santander pays out 38.2% of its earnings in the form of a dividend. Royal Bank of Scotland Group pays out 35.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Banco Santander has raised its dividend for 2 consecutive years. Banco Santander is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

1.9% of Banco Santander shares are owned by institutional investors. Comparatively, 0.6% of Royal Bank of Scotland Group shares are owned by institutional investors. 9.5% of Banco Santander shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Banco Santander and Royal Bank of Scotland Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Banco Santander 15.70% 7.28% 0.53%
Royal Bank of Scotland Group 12.31% 5.09% 0.34%

Valuation & Earnings

This table compares Banco Santander and Royal Bank of Scotland Group’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Banco Santander $57.19 billion 1.28 $9.22 billion $0.55 8.29
Royal Bank of Scotland Group $20.84 billion 1.73 $2.79 billion $0.48 12.48

Banco Santander has higher revenue and earnings than Royal Bank of Scotland Group. Banco Santander is trading at a lower price-to-earnings ratio than Royal Bank of Scotland Group, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Banco Santander has a beta of 1.11, suggesting that its share price is 11% more volatile than the S&P 500. Comparatively, Royal Bank of Scotland Group has a beta of 1.06, suggesting that its share price is 6% more volatile than the S&P 500.

Summary

Banco Santander beats Royal Bank of Scotland Group on 13 of the 17 factors compared between the two stocks.

Banco Santander Company Profile

Banco Santander, S.A., together with its subsidiaries, provides various retail and commercial banking products and services for individual and corporate clients worldwide. It offers demand and time deposits, and current and savings accounts; mortgages, consumer finance, auto finance, and personal loans; export and agency finance, trade and working capital solutions, syndicated corporate loans, and structured financing; debt capital markets and global markets services; and debit and credit cards. The company also provides cash management, transactional, payrolls, and wealth management services. In addition, it is involved in the corporate banking, treasury, and investment banking activities; and real estate investment, leasing, securitization, fund management, e-commerce, technology services, air transport, renting, insurance brokerage, aircraft rental, payments and collection, securities investment, financial advisory, sports, electricity production, and Internet activities. Further, the company offers asset management and private banking services, as well as mobile and online banking services. It operates through a network of 13,217 branches. The company was formerly known as Banco Santander Central Hispano S.A. and changed its name to Banco Santander, S.A. in June 2007. Banco Santander, S.A. was founded in 1856 and is headquartered in Madrid, Spain.

Royal Bank of Scotland Group Company Profile

The Royal Bank of Scotland Group plc, together with its subsidiaries, provides banking and financial products and services to personal, commercial, corporate, and institutional customers worldwide. It operates through Personal & Business Banking, Commercial & Private Banking, RBS International, and NatWest Markets segments. The company also offers wealth management, financial planning, investment management, asset finance, and offshore banking; and financing and risk solutions, as well as trading and flow sales services. The Royal Bank of Scotland Group plc was founded in 1727 and is headquartered in Edinburgh, the United Kingdom.

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