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In early December, I noted that Spanish banking giant Banco Santander (NYSE: STD) was at the top of my watchlist for my real-money Motley Fool portfolio. Negative sentiment about the Ireland bailout and plunging share prices for Irish banks like Allied Irish Banks (NYSE: AIB) and Bank of Ireland (NYSE: IRE) had combined to put pressure on its share price.

However, my feeling was that Santander's presence abroad (particularly in Brazil), its dramatic diversification, and its increasing domestic market share were enough to keep this bank more than just afloat. In addition, most of the heat that Spanish banks were feeling was targeted toward the cajas, or savings banks, which don't include a giant like Santander. Lastly, Santander has proven adept at managing credit risk, learning numerous lessons in its 150-plus years of experience.

Has anything changed?
When I wrote my last article, Santander was trading at $10.97 per share; it slowly faded throughout December, along with other euro-area banks such as National Bank of Greece (NYSE: NBG). I was hoping shares would plunge even more, letting me scoop up a first-rate bank at a dirt cheap price. Unfortunately, in the past month, shares have rebounded nearly 15% and closed yesterday around $12.50. I don't think I've necessarily missed the boat, but in retrospect, maybe I should have pulled the trigger when I first thought about it.

Not so fast, though. If you've read recent headlines, you know Spanish banks such as Santander and BBVA (NYSE: BBVA) are facing higher funding costs because of the country's sovereign debt woes, and this is eating into their net interest income. Santander's net interest income for its European arm fell by 5.6% in the latest quarter, and even worse, its net loan-loss provision rose by 5.3% from a year earlier. Moreover, overall profits slipped by 4.6% this quarter, despite a strong showing in places like Brazil. The truth of the matter is that high unemployment and an extraordinarily weak housing market are going to continue to take a toll on Santander's activities.

Today, shares had slipped more than 2% as of midday trading. I wouldn't be shocked if they continued to fall; you can be sure I'll be watching carefully.

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Jordan DiPietro owns shares of National Bank of Greece, as does the Fool. Try any of our Foolish newsletter services free for 30 days. 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 Motley Fool has a disclosure policy.