More Spanish Banking Woes

This article is part of our Rising Star Portfolios series.

I've had my eye on Spain's largest bank, Banco Santander (NYSE: STD  ) , for months now. I'll admit I've thought about buying it for my Motley Fool real-money portfolio several times, only to be spooked by Spain's high unemployment and fragile banking system.

However, I've vowed to keep my eye on it in hopes of finding the right price -- or maybe just the courage to step up and buy what I think is a really high-quality bank trading on the cheap.

The latest banking saga
The biggest problems in Spain don't necessarily revolve around the bigs like Santander or BBVA (NYSE: BBVA  ) , they have more to do with the smaller savings, or cajas, banks.

Yesterday, four of the savings banks were supposed to merge, creating what would be called Banco Base. However, that all came to a halt as one of the key players, Caja Mediterraneo (CAM), had to apply for a much larger than expected cash infusion by the Bank of Spain (nearly twice the original amount). Now the four banks that were supposed to merge have to present new plans to the Bank of Spain in order to meet capital requirements that were announced after several stress tests.

Private investors were first thought to be a funding option, but now that too has been scrapped. Overall, the European markets haven't reacted too terribly, as many investors felt like this news had already been discounted into the system. However, BBVA was down over 4% in intraday trading and Santander was down about 1.5%.

The foolish bottom line
It's important to note that apparently the Bank of Spain may have sent documents to Santander, BBVA, La Caixa, Banco Popular Espanol, and Banco de Sabadell, offering up CAM. This could possibly have the potential to increase the share of retail deposits for a company like Santander, which has already been on a massive shopping spree this year.

I'll be watching to see if Santander takes this as yet another opportunity to expand its reach in Spain and gain even more of its overwhelmingly large market share.

Want to get the latest news and analysis on Santander? Click here to add it your Watchlist!