Santander Keeps Building Assets

The more I keep researching and reading about Santander (NYSE: STD), the more interesting this global bank gets. I am still not completely certain that Santander will succeed in reaching a deal with M&T Bank (NYSE: MTB) or even reach a deal with Allied Irish Bank (NYSE: AIB) for its stake in MTB, but there are always other interesting fish in the see.

Last month, Santander paid $2.5 billion to acquire Bank of America's (NYSE: BAC) 25% stake in Santander Mexico. Bank of America originally paid Santander about $1.6 billion for that stake in late 2002, so that is not a bad return on investment. With the deal, Santander took full control of its Mexican operations, but the deal did not change earnings or capital all that much.

And now today Santander is at it again - paying close to $700M to Swedish bank SEB for its German commercial banking business. This move will not have a major impact on Santander's earnings or returns, but it will double the company's German branch count.

That is two deals in two months to expand banking operations in places where Santander already has a foothold and where business conditions are relatively good. True, Mexico has taken a hit during this recession and Germany is at risk from contagion in Europe, but they are still attractive banking markets. Moreover, Santander had a little competition for this latest deal (supposedly from Italy's Unicredito), so that at least suggests some positive signs of life in the overall marketplace.

What next for Santander? I would expect them to invest more heavily in Peru and Colombia. I would also expect them to do more deals in the United States. They have been curiously quiet in the US of late. While banks ranging from JPMorgan (NYSE: JPM) to BB&T (NYSE: BBT) to PNC (NYSE: PNC) stepped up to acquire failed or severely stressed banks, Santander has been quiet. Sooner or later, I have to assume that changes - if they cannot do a deal with M&T, do they look at other options like Regions (NYSE: RF), Fifth Third (Nasdaq: FITB), Suntrust (NYSE: STI) and so on?

And what about other areas? Canada is not quite as free-wheeling as the United States, but it is an attractive market. And then there is Africa and Asia - a company with Santander's experience in developing economies could probably do well in these regions.

I guess we will just have to wait and see. In the meantime, I do not see these two deals getting in the way of any U.S. strategy the company may desire - they still have the resources to buy MTB if they wish, though I suppose all parties involved will at least wait for the results of the Europe-wide stress tests (due to come out later this month).

Disclosure - I own share of JPMorgan and BBT