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The Most Complicated Retail Banking Giant

Banco Santander (NYSE: SAN) has banking operations located all around the world. From the United States to the U.K., Spain, and even emerging Latin American economies, it's a massive $1.5 trillion bank with very few peers due to its geographic diversification.

Join The Motley Fool's Gaby Lapera and contributor Jordan Wathen as they discuss Banco Santander.

A transcript follows the video.

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This podcast was recorded on July 18, 2016.

Gaby Lapera: I'm really excited to talk about our topic today, which is Banco Santander, or just Santander as we're going to call it today. Why don't we just dive in? I was looking at this bank online and Capital IQ and through their investor relations website, and the thing that struck me was the complexity of this bank.   

Jordan Wathen: Right. Banco Santander, it's the largest bank in Spain, and it's definitely one of the largest banks around the world. At the end of the most recent quarter, I think they had about a trillion and a half of assets, which would put it among, say, our big four here in the United States. It's mostly a retail bank, so they're basically in the business of taking deposits and making loans. They do that from about 14,000 branches, so it's operationally huge. Bank of America, for instance, has something like 5,000 branches, just to put that in perspective.   

It's historically earned respect for being very efficient and very operationally lean, because it has, at least historically, spent less than 50% of its income on operating expenses, whereas its peers are about 62% operating expenses as a percentage of income.   

Lapera: This is really interesting to me, because I know that recently they've been having a lot of trouble. Right now, Santander is ranked as the third-largest eurozone bank by market cap, sitting around $58 billion U.S. dollars, which I just want to remind you, we should put everything in U.S. dollars if we can, so it's easier for our mostly U.S.-based listeners to understand what's going on. I know that we have some international listeners, shout out to you all right now. Since 2014, the bank has lost about 50% of its market value. It was around $100 billion U.S. dollars two years ago, which is crazy.   

Wathen: Right. It's really a huge bank. It's ran into some issues, of course, and some have been long-term issues. For instance, the fact that it's in Spain has been a bit of problem because since the financial crisis, Spanish property dropped in value and basically never recovered. If you look at its Spanish loan book, 6% of its loans are non-performing, which is, compared to the American banks, how their real estate loans are faring, it's pretty poor performance.   

Lapera: Not just that, but Spain has incredibly low interest rates.

Gaby Lapera has no position in any stocks mentioned. Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.