[Beginning of Cramer's verbatim comments for this segment...]

Jim:          Tonight, we are heading to Brazil… but not for Carnival… or for the Olympics… or for a total body sculpt and free botox… oh that would be fun, and age reducing… we are more interested in helping you try to make money than feeling good… or even looking good… which is why I think that the sexiest thing coming out of Brazil right now is not Giselle… but the IPO of the Brazilian operations of Banco Santander Brasil STD… you hear about IPO’s constantly… but nobody ever tells you what to do with them… it is my job as your investing coach to teach you how to play them… and that is what we are going to right now with Banco Santander Brasil STD (BSBR)… which will set the price tomorrow and start trading as an ADR on New York Stock Exchange under the symbol BSBR...

Now we know that Brazil is ultra, ultra hot… the countries GDP is expected to grow at a 5% to 6% clip… its financial services industry is booming… the 2016 Olympics… icing on the cake.. they just won that… it is a sign of really how far the country has come since the mid ‘90’s… and Brazil’s ? , it is like China over there… it has climbed 67% this year… it be steaming… even as Brazilian stocks still trade at a 14% discount to all stocks worldwide… some people say that Brazil is the US in the 1950’s… I will not disagree… although, I think that Mulart, the head of it, is more of a Socialist than a general like Ike.

So, we like Brazil… and we like Banco Santander Brazilian operations… Santander which is a huge global bank based in Spain… you might recognize it as Sovereign Bank here… put together its Brazilian business thru a pair of really smart acquisitions starting in 2000.. when it bought Banco De Sao Paolo, for $4.8b… and another one in 2008, when it bought ABN Amber… remember how much they were hurting.. it bought their operation AMN Amber Rio for $16b… it stole that one.

Santander was betting on an economic expansion of Brazil… smart right? growing middle class… increased demand for loans and credit cards… and they just got credit cards down there… and not just to pay for multiple plastic surgeries… including the proprietary Brazilian butt lift… given where the IPO is expected to price… Banco Santander Brazilian unit which had pieced together thru two acquisitions for a little more than $20b should be valued at… get this… at between $47 and $53b… and that is if it does not pop.

Banco Santander is Brazils leading full service bank in the country… it is also the 4th largest Brazilian bank over all… 10.2% market share in terms of assets… the 3rd largest bank that is not owned by the government… it is operations are concentrated in the south and the southeast of the country… I want you to think Rio and Sao Paulo… that is nearly ¾’s of Brazil’s GDP… 2091 branches… 1521 mini branches… 18,100 ATM’s… there is an ATM at every corner… 9.9 million active account holders… Santander’s Brazilian unit looks like a fabulous bank… in the first half, net interest income was up 13%… average loan book increase rose 18.6%…we would kill for those numbers here… its corporate lending and trade finance business up 13%… this is a real growth company… retail banking side, mortgage loans, up 39.6%.

So how do we play the IPO of this great Brazilian bank?… not by buying the IPO… I think you should buy the parent company… Banco Santander STD.. we play Brazil by going to Spain… we are like the Lincoln brigade, except we are not affiliated with Uncle Joe Stalin… to be distinguished from my real uncle… or at least great-great-great uncle Vlad Lenin.. this is just like Wynn’s IPO of its Macau business in Hong Kong… talked about that, remember I have been recommending Wynn for a long time… I told you that I thought Wynn was a buy because the IPO of its Macau business would give the Macau side the independent valuation that would make people realize that Wynn should get some credit...

Okay, the principle here is the same… Banco Santander, the parent, which has operations all over the world… is not getting enough credit for its ultra hot Brazilian operations… Banco Santander is a $134b bank that I believe, after this deal, will be less valuable than the sum of its parts.. how long do you think that will last?… once its Brazilian unit starts trading separately, investors will see that… the stock is going to get a boost… if Santander Brazilian operations is priced as expected… the rest of the bank is getting an implied price to earnings multiple of 6.9 times earnings… that is super cheap… when you consider that right now Banco Santander is trading at 11 times earnings… I am talking at looking at a 30% or more gain… as the IPO unlocks value for the parent company… it won’t happen over night.

The other reason that I would buy Banco Santander, instead of participating in the IPO is that the new merchandise Banco Santander Brasil actually is expensive… I am using 2009 earnings, where it is expected to price, the Brazilian unit will be valued at 21.7 times earnings… uh huh, much more expensive than Banco ? which I have recommended, that is 18... Banco Atel, 19 times… now Banco Santander is a high quality bank… it deserves to trade at a premium… but I just do not see there being that much upside left after the deal… the safer way to play the IPO is to buy the parent… 14,000 branches… more than any other international bank on earth… how about that?… 39,000 ATM’s, 90 million customers in 40 countries… I am telling you, this is the bank… this is what happens in late stage capitalism in America when our banks fall apart.

Banco Santander may not seem to have the sizzle of its Brazilian subsidiary… but it is a whole lot more stable… thanks to its size, its international diversification… and it will allow you to profit from the IPO from its Brazilian unit without taking on the risk of buying its shares… oh by the way, I do mean safer… as anyone who has been to a Philadelphia Eagles game knows… Santander is the bank of the Eagles… Santander promotes itself as the safest bank in the US… and you know what? considering the destruction of American competition… they may be right.

Here is the bottom line…

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Bottom Line:     The best way to play the IPO of Banco Santander Brasilian unit… is to simply buy Banco Santander Brasil STD (BSBR), the real STD as I call it… because the IPO of its Brazilian operation will unlock a lot of value in the stock… and even if the IPO turns out to be a flaparoni mcfatty… you still own a fabulous international financial institution.

 

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