Foolish investors may want to make room for international stocks in their portfolios to mitigate some of the risk posed by a U.S. economy grappling with inflation and severe  default anxiety. I think I've found one solid stock that can do precisely that.

Banco Santander (NYSE: STD) is one international banking stock that's been delivering encouraging signals. Despite the fact that Spain looks to be in much worse shape than the U.S. (and threatens banks' balance sheets), Santander's impressive performance nonetheless compels me to remain bullish about it.

Strong earnings
In its latest quarter, the bank saw growth of 5.5% in its net interest income and an 11.5% jump in its net fee income on a year-on-year basis. In addition, a 10.2% decline in provisions for loan losses helped boost net operating income after provisions by 7.9%. For an investor, these signs are undoubtedly encouraging.

Personally, I'm looking for relatively cheap stocks with good dividend-paying capacity. But I am not willing to compromise on stability and growth. Keeping all this in mind, let's put Santander through the wringer and see how it fares.

Evaluating profitability
Return on equity (ROE) is a crucial metric that evaluates the profitability and efficiency of a stock. Santander's net income grew on a sequential basis, but ROE decreased ever so slightly to 11.7% due to increases in common stock. That 11.7% meets my minimum expectations for a company of this type, but not by a huge margin. So far, so good, moving on.

Stability and yields
Recently, the company's Tier 1 capital ratio reached a decent 10.9%, reflecting its strong equity position and sound financial health. Comparable Banco Bilbao's (NYSE: BBVA) Tier 1 ratio is 9.8%, while Bank of Ireland (NYSE: IRE) stands at 9.7%. That should give you some idea of the quality of the bank's assets.

Among banking stocks, Santander is sporting a very attractive yield right now. The payout is surely among the best of its comparables, with an attractive current dividend yield of 9.1%. Banco Bilbao, another Spanish bank, offers a yield of 7.80%.

The Foolish bottom line
I have discussed Banco Santander's aggressive growth strategy in detail in previous articles. Looking at its strong fundamentals, Santander looks like an attractive stock for long-term investors who focus on a company's ability to grow and generate profits without having a steep share price (in Banco Santander's case, a P/E ratio under 10 and a P/B under 1.0). What say you, Fools? Please scroll down and use the comments section to let us know.

Fool contributor Zeeshan Siddique does not own any of the stocks mentioned in the article.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.