Benchmark U.S. Treasury yields soared to 1.9%, marking their highest level since January 2020. The rise in Treasury yields will allow financial institutions to generate higher revenues. In addition, the financial sector has witnessed a rebound due to increasing financial transactions and capital market activities amid a recovering economy.
At its December meeting, the Federal Reserve announced that it would accelerate the reduction of its monthly bond purchases and signaled three interest rate hikes this year. Higher interest rates enable financial institutions to increase their top-line. Furthermore, the financial sector is expected to grow by integrating advanced technologies into business operations in the coming months. According to a Globe Newswire report, the global financial services market is expected to grow at a 6% CAGR through 2025.
Given this backdrop, we think it could be wise to add quality financial stocks S&P Global Inc. (SPGI), Banco Santander, S.A. (SAN), and Santander Consumer USA Holdings Inc. (SC) to one’s portfolio.
S&P Global Inc. (SPGI)
SPGI in New York City is a provider of ratings, benchmarks, analytics, and data to the capital and commodity markets worldwide. The company operates through the S&P Global Ratings, S&P Global Market Intelligence, S&P Global Platts, and S&P Dow Jones Indices segments.
On Jan. 4, 2022, SPGI announced the acquisition of Durham, North California-based The Climate Service, Inc. The acquisition is expected to enable SPGI to add capabilities to its portfolio of environmental, social, and governance (ESG) insights and solutions for its customers. In addition, the acquisition will help SPGI offer its clients more transparency, robust and comprehensive climate data, models, and analytics.
SPGI’s revenues increased 13% year-over-year to $2.08 billion for the third quarter, ended Sept. 30, 2021. The company’s net income increased 75% year-over-year to $797 million. Also, its EPS came in at $3.30, representing a 75% increase year-over-year.
Analysts expect SPGI’s EPS and revenue for its fiscal 2021 to increase 17.1% and 11.1%, respectively, year-over-year to $13.69 and $8.27 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 38.6% in price to close the last trading session at $424.15.
SPGI’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Quality and a B grade for Growth. It is ranked #15 of 121 stocks in the Financial Services (Enterprise) industry. Click here to see the additional ratings of SPGI for Value, Momentum, Stability, and Sentiment.
Banco Santander, S.A. (SAN)
Headquartered in Madrid, Spain, SAN provides retail and commercial banking products and services to individuals, small- and medium-sized enterprises, and large companies worldwide. It offers demand and time deposits, current and savings accounts, mortgages, consumer finance, and cash management services.
On Dec. 15, 2021, SAN announced that it will invest $6 billion between 2022 and 2024 to promote the digital transformation of its Latin American operations. The transformation will allow SAN to cater to the needs of the fast-growing Latin American markets.
For its fiscal third quarter, ended Sept. 30, 2021, SAN’s net interest income increased 2.6% sequentially to EUR8.45 billion ($9.60 billion). The company’s attributable profit increased 5.2% sequentially to EUR2.17 billion ($2.46 billion). And its EPS came in at EUR0.116, up 4.4% sequentially.
For its fiscal year 2021, analysts expect SAN’s EPS to increase 38.7% year-over-year to $0.43. Its revenue for fiscal 2022 is expected to increase 3.6% year-over-year to $52.95 billion. The stock has gained 17.6% in price over the past month to close the last trading session at $3.60.
SAN’s POWR Ratings reflect strong prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system. It has an A grade for Momentum and a B grade for Growth, Value, and Stability. Within the 98-stock Foreign Banks industry, it is ranked first. To see the ratings of SAN for Sentiment and Quality, click here.
Santander Consumer USA Holdings Inc. (SC)
SC is a specialized consumer finance company that provides vehicle finance and third-party servicing in the U.S. The Dallas, Tex.-based company offers vehicle financial products and services. It also offers financial products and services related to recreational and marine vehicles, personal loans, private-label loans, and leases.
On Jan. 17, 2022, SC announced its partnership with Comp-U-Dopt, a technology, and non-profit organization, to help bridge the digital divide in several U.S. cities. The partnership aims to provide greater financial empowerment and promote the well-being of communities that are facing challenges in obtaining digital connectivity.
SC’s net income increased 55.7% year-over-year to $763.32 million for the third quarter, ended Sept. 30, 2021. The company’s EPS increased 57.6% year-over-year to $2.49. Also, its return on average assets came in at 6.3%, compared to 4.1% in the year-ago period.
Analysts expect SC’s EPS and revenue for its fiscal 2021 to increase 260.3% and 29.4%, respectively, year-over-year to $10.34 and $7.80 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 77.3% in price to close the last trading session at $41.55.
SC’s strong fundamentals are reflected in its POWR ratings. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Stability and a B grade for Value, Sentiment, and Quality. It is ranked #4 of 121 stocks in the Financial Services (Enterprise) industry. Click here to see additional ratings of SC for Growth and Momentum.
SPGI shares were trading at $422.95 per share on Wednesday afternoon, down $1.20 (-0.28%). Year-to-date, SPGI has declined -10.38%, versus a -4.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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