(Bloomberg) -- Banco Santander SA risks confusing investors and denting the performance of its shares if it drops the practice of reporting results along geographical lines, according to analysts at Citigroup Global Markets and Autonomous Research.
Santander Chief Financial Officer Jose Garcia Cantera made the suggestion at an analyst meeting in London last week, according to Citi analyst Marta Sanchez Romero. The step would “add complexity and potentially reduce confidence in Santander’s numbers,” she said in a Dec. 5 note seen by Bloomberg.
Santander operates in places as diverse as Brazil and the UK and in eight currencies in their main markets, far more than most European lenders — giving the bank high exposure to foreign exchange volatility. It currently delivers results both by business unit and location.
“In the absence of geographic reporting, predictability of future results could suffer and estimate dispersion could increase, which we think would be unhelpful for the multiple,” Autonomous analyst Britta Schmidt said in a note, dated Dec. 4, obtained by Bloomberg. “Given the variety of rate and FX environments Santander operates in, forecasting earnings from the outside for global divisions is difficult”.
Santander declined to comment on the analysts’ views. The criticisms aren’t necessarily representative of all analysts who cover the bank.
Sanchez Romero already challenged the bank on the topic after second-quarter Santander earnings in July. “Do you think the new reporting is helping investors understand Santander better?” she said, according to the transcript of an earnings call compiled by Bloomberg. “I think not.”
Business-line reporting makes it easier for investors to grasp how the bank is managing each unit, Santander Chief Executive Officer Hector Grisi replied. “This will enable us to give a lot more value to our shareholders,” he added.
There is skepticism among analysts that this approach will work. Benjamin Toms at RBC Europe Ltd sees the bank trying to raise the estimates for each division which would then add up to a higher valuation for the entire bank.
“This philosophy has historically not always worked in the market,” he told Bloomberg. “Analysts will need to rely much more management outlook commentary to steer their estimates, which is tricky because Santander has a mixed record when providing guidance to the market.”
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