Global Investing

from Alexander Smith:

Santander wins with Brazil float

    Buying ABN AMRO may have bankrupted Royal Bank of Scotland and Fortis, but it has proved another coup for Spain's Santander whose chairman Emilio Botin has shown his eye for a bargain.
    After flipping Italy's Banca Antonveneta for an impressive profit before the ink was even dry on the contract to take it over from ABN, Botin is now looking to float Banco Santander Brasil, including another former ABN asset, Banco Real, once part of the Dutch bank's Latin American empire.
    With Brazilian valuations riding high and the IPO market flourishing, Citigroup reckons BSB could be worth as much as $30 billion. If so, the partial sale would again demonstrate Botin's ability to spot a good deal.
    Brazil is far too important to Santander -- it accounted for 18 percent of the bank's first half profits of 4.5 billion euros -- for Botin to give up control. But a flotation of 15 percent of the Brazilian bank could raise $4.5 billion of scarce capital while giving Botin another currency for shopping in South America. lt is already Brazil's third-largest bank by assets.
    Santander has been able to keep buying through the financial crisis, becoming the biggest bank in the euro zone as a result. Botin has also picked up Sovereign Bancorp in the U.S. and Alliance & Leicester, along with the remains of failed former building society Bradford & Bingley, in Britain.
    Floating the Brazilian business would crystallise its value. It might also boost Santander's own share price, but risks investors taking the view that a global roll-out of the bank's name and brand means the parent is becoming a conglomerate rather than an integrated group.
    The possibility of attracting a conglomerate discount won't have escaped Botin, whose family still owns nearly 2.5 percent of the $115 billion bank.
    Unlike his colleagues in the banks which have failed, Botin has his family fortune tied up in the business he runs. This, surely, is a powerful reason why Santander has avoided plunging into areas where the risk was far greater than the executives knew or cared. The bank has the strength to take advantage of the fashion for things Brazilian, and he can reflect that the acquisition which sunk RBS has done him no harm at all.

The final frontier market

The present may be pretty bleak for investors, but that has not stopped one firm from looking decidedly at the future – privatised space travel. Fortis Investments reckons space tourism will one day become all the rage with travellers willing to fork out thousands upon thousands of dollars for the adventure.

SpaceIn the latest issue of Fund Expert magazine, Fortis looks at the nascent industry and reckons that the price of a space trip – roughly $200,000 to begin with – should come down substantially as a result of competition. There is already some – including Virgin Galactic, which is aiming for launch by next year, and Rocketplane, which should go up the year after.  They will start modestly, just sticking their noses out of the atmosphere.

The new industry, however, eventually should mean a boom in new employment, requiring commercial astronauts, flight attendants, tour operators and so on. But the flight operators may also be licking their lips at the prospect of getting government military and scientific research contracts. Fortis – whose Brussels headquarters coincidently is located on Avenue de l’Astronomie — reckons that a NASA flight currently costs the U.S. government $1.3 billion a pop. So outsourcing would be attractive.

Is there a gadget to avoid recession?

apple.jpgSome investors reckon the U.S. economy is in recession and undergoing a W-shaped pattern of growth — that is decline, temporary recovery, decline again, then rebound.

Fortis Investments is one such believer and is telling its clients that they are currently in the second down phase. That implies a rebound is coming, but Fortis is not ready to say when. Not anytime soon, is all it suggests.

One quick gauge of a country’s economy, meanwhile, is to drop into a popular shopping area and see what people are doing. Purely subjectively, a visit last week to two malls in the United States — in Maryland and Virginia — suggested things are pretty bad.