Jaime Bece

Bank of America vs. Banco Santander: Whose Dividend Is Secure?

I totally agree they have a potential risk as 70% of their mortgage book comes from Spain and UK. However there are significant differences in lending standards in the US, UK and Spain (by far the strictest) that really make the difference.

Some of these (almost no lending >80% LTV, €6bn generic provisions or overcollateralization) are the main reason why Santander has overperformed its peers over the last quarters. It can get boring, but it no Spanish bank has had to write down any exposure to US, UK, Spain or Singapore real estate it's very likely that's not a matter of luck, but skill.

In the US you could find "pay-option ARMs", "pick-a payment loans", "minimum payment loans" and some lenders like Countrywide reporting 90% of their mortgages were done without confirming the borrower's income.. Something similar happened with Bradford & Bingley in the UK (-50% in 3 days and -95% from its peak).

On the other hand you are very right pointing out they are exposed to risky markets. The problem with banks is they do all they can to remain opaque, something I hope will change in the future..

Interesting blog

Bank of America vs. Banco Santander: Whose Dividend Is Secure?

You could also take into account Santander has given an uniterrupted dividend to its shareholders for more than 25 years, even through tough recessions as the one suffered in 1992-97 in Spain. No exposure to subprime and no "new team entering investment banking business just to lose a couple billions in a few months and decide to close it" (aka Bank of America).