Tuesday, September 3, 2013

Investopedia: Has Santander Made It Through The Worst?

Like so many other banks in Europe, Santander (NYSE:SAN) has been through the wringer. Its home market of Spain has seen devastating economic decline, and relatively healthier operations in faster-growing areas like Brazil and Mexico haven't made up the difference. The bank's shares have dropped more than 50% over the past five years.

Bad as things have been, investors in the U.S. have seen plenty of examples of how bank stocks can recover significantly once credit costs begin to stabilize and then improve. On one hand, then, is the possibility of a Bank of America (NYSE:BAC) or Citigroup-like (NYSE:C) rise from the ashes. But on the other hand is the truly scary state of affairs in Spain and the risk that Latin America is starting to slow to a significant degree. Although Santander shares may be a little cheap today and would certainly have significant upside if/when the market believes Spain has stabilized (and with it, Santander's credit costs), the risk/reward tradeoff does not seem appealing enough to me when considering the options available to investors in other European and Latin American banking stocks.

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