The debt and banking chaos in Europe should set up opportunities for value investors. Strong companies are likely to be trading at steep discounts just because they're associated with countries in the headlines.

To be good bargains, companies need to be strong enough to survive and thrive and need to have their share prices dive simply because of market fear. CAPS player Pennyperson summed up the value case for Banco Santander (NYSE: STD) with, "Good solid bank and pays a nice yield. It's been hit hard by the European banking crisis."

A SWOT analysis -- a look at strengths, weaknesses, opportunities, and threats -- will help shed some light on Santander's business prospects. After the SWOT, a quick valuation check will dive into the discount.

Strengths:

  • Global operating profile. More than half of Santander's profits come from Latin America, the United Kingdom, and the United States.
  • Santander has publicly listed part of its stake in Banco Santander Chile (NYSE: SAN) and Banco Santander Brasil (NYSE: BSBR). If it needed to raise capital, Santander could sell another slice of operations unaffected by European debt worries.
  • Net nonperforming loan additions have been steadily decreasing since early 2009.
  • A tier 1 ratio of 9.7% is well above requirements to be considered well-capitalized.
  • Banco Santander ranked 14th in the Global Finance "World's 50 Safest Banks 2010" list.
  • The 4.7% dividend yield provides support to the share price.

Weaknesses:

  • It's a bank.
  • Santander's emerging market business does not include a material presence in Asia.
  • A high payout ratio is a warning sign that the dividend isn't safe if performance takes a hit.

Opportunities:

  • Financial trouble in Europe will offer opportunities to pick up assets or banking operations at fire sale prices.
  • Banco Santander's emerging market operations allow it to benefit from growth in Brazil and the rest of Latin America.

Threats:

  • Financial troubles in Greece, Ireland, Portugal, Spain, and Italy could damage Santander's asset values or create a currency crisis for the euro.
  • European banking authorities may impose new regulations that limit banks' operating flexibility.

The SWOT shows that Banco Santander is a strong bank that isn't likely to go begging for bailouts or need to dilute shareholders with a capital raise. But has the market dragged the share price into deep value territory? The table below shows how it compares to competitors from countries that aren't making eurozone bailout headlines.

Bank

Headquarters

P/B

P/E (TTM)

Tier 1 Capital Ratio

Banco Santander

Spain

1.02

9.01

9.70%

Westpac Bank (NYSE: WBK)

Australia

1.74

10.9

9.10%

UBS (NYSE: UBS)

Switzerland

1.27

8.74

14.20%

Barclays

United Kingdom

0.64

3.35

10.00%

JPMorgan Chase

United States

0.93

11.04

11.90%

Mitsubishi UFJ

Japan

0.64

11.71

11.57%


Source: Yahoo! Finance and bank earnings reports. P/B means price-to-book ratio, and TTM means trailing 12 months.

While Banco Santander is priced in value territory based on price-to-book and price-to-earnings ratios, it isn't trading at a steep discount to its peers. Only Westpac and UBS trade at higher price-to-book ratios, and those premiums seem fair with Switzerland's stable currency and Australia's commodity-based economy. I'd like to see Banco Santander trade down closer to its 52-week lows before considering a buy.

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Fool contributor Russ Krull has no financial interest in any company mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.  The Fool's disclosure policy has a tier 1 capital ratio of 100%.