Santander against its nemesis

Once upon a time there were 2 powerful banks in Spain, Santander and BBVA. Both performed similar but with tiny differences. Santander was faster, more agressive, but it also took more risks. Santander decided to expand in the UK and South America. On the ohter hand, BBVA was more conservative and risk averse. China and the southern part of US were its main targets.

Markets have valued this small style differences in various periods of time:

• 1994-1998: BBVA outperformed STD
• 1998-2006: both performed approximately the same way
• 2006-2009: Santander outperformed

For the short-medium term our bet was to buy BBVA and sell Santander. We thought the spread in price had gone too far. For the moment it´s not working well. As you may see in the graph above (click on it to enhance on different screen), our stop loss will be the red diagonal segment: if overpassed, we are out. In any case, we will keep you informed.

22/10/2009