Banco Santander: One Man's Fear is Another Man's Opportunity

NEW YORK (TheStreet) -- Spanish banks have been in the headlines for months now, as investors (and the Spanish government) ponder their solvency and fate. One bank that is attractive to investors is arguably one of the most misunderstood banks trading: Banco Santander(SAN) .

Banco Santander provides a range of banking and financial products. It offers various deposit products, such as demand and time deposits; savings and current accounts; repurchase agreements; mortgages and personal loans; consumer finance; and telephone, mobile and online banking services. The company operates primarily in Spain, the United Kingdom, other European countries, Brazil and other Latin American countries and the United States. As of Dec. 31 it had 6,608 branch offices in continental Europe; 1,379 branches in the United Kingdom; 6,046 branches in Latin America; and 723 branches in the United States.

From the description of the company, we can see that the bank is involved in more markets than just Spain and the surrounding countries. This is the primary driver of the opportunity. Many investors mistakenly believe the bank derives the majority of its profits from Spain, but upon closer investigation, this is not the truth.

As the below chart details, Spain and Portugal (and, heck, the rest of Europe ex-Germany) account for less than 20% of net attributable profit. This is less a Spanish bank than it is a Latin American bank based in Spain. This fact is too often overlooked.

Once an investor can get past the mischaracterization of the bank, Santander looks extremely compelling; it trades at approximately 64% of book value, has a dividend yield of 14%, a forward P/E of 7.6x, a PEG ratio of 0.55 and strong core capital ratios. As with any investment, further investigation is warranted.

Real estate
One of the largest concerns noted with Spanish banks (or just about any bank) is real estate exposure after the popping of the bubble in Spain. Santander is in an enviable position within Spain, as its exposure is not as heavy as other banks' and it is well provisioned for the sector.