Barclays Upgrades Banco Santander, Positive On Positioning

Rohith Chandra-Rajan of Barclays has upgraded Banco Santander, S.A. (ADR) (NYSE: SAN) to Overweight from Equal Weight, saying a recovery in the Brazilian business offsets some weakness in the U.K. and Spain, in addition to receding FX headwinds.

"As a result, we expect Santander's RoTE to be relatively stable at 10-11% over the coming years with capital continuing to build from an adequate but relatively low base. This does not appear to be discounted by the current share price either from a fundamental or a sum-of-the-parts perspective. So, with improving economic prospects, we expect the shares to outperform," Chandra-Rajan wrote in a note.

Related Link: Benzinga's Top Upgrades

However, the analyst acknowledged the U.K.'s decision to leave the EU and the subsequent cut to U.K. interest rates adds to earnings pressure.

That said, the company's end-September strategy update could provide further insight on implications of Brexit on the UK business, the key issues of Spanish profitability, and the operating outlook for Brazil.

At time of writing, ADRs of Banco Santander were up 0.77 percent to $4.59.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!