This article is part of our Rising Star Portfolios series.

From the debt crisis in Europe to the downgrade of U.S. credit late last week, investors are now in full-swing panic mode. Shares of almost every index, from Brazil to Japan, have been pummeled, taking down myriad stocks in almost every sector.

So which stocks are finally cheap enough to buy, and which are not?

A brief calm in Europe -- for right now
For the first time since the European Central Bank announced its debt-purchase program 15 months ago, it decided to buy Spanish and Italian bonds in order to calm investors. Some analysts have estimated that it's purchased about $5 billion worth of bonds, sending yield spreads over German bonds down from record highs.

There's no underestimating the importance of Italy and Spain -- respectively, they are the third- and fourth-largest economies in the Eurozone, with a total GDP of almost $3.9 billion. But now there are even more worries, and they expand beyond the typically criticized members of the PIIGS countries: Portugal, Ireland, Italy, Greece, and Spain. 

France is being highlighted as a possible problem child. The cost of insuring French sovereign debt against default catapulted to record highs yesterday, which could pose far-reaching problems. France's AAA credit rating is second in importance to Germany's, and helps the EU's Financial Stability Facility, the program that funds bailouts to underfunded countries such as Greece. If France were downgraded, borrowing costs could increase, sending the Stability Facility into much turmoil.

Uncertainty breeds fear
It's true that almost every sector is feeling the heat from the global economic fallout, but banks are feeling it even moreso. And those situated in Europe -- especially those with exposure to countries like Greece, Spain, and Ireland -- have taken a truly brutal beating. But at what point do investors compare a stock's share price with the actual fundamentals of its business, and forget about the short-term gyrations of the market?

Below, I've listed seven banking stocks that have witnessed a terrible past three months, and which now trading at dirt cheap prices.


3-Month Share Price Drop

P/E Ratio

P/B Ratio

Banco Santander (NYSE: STD) (26%) 7.7 0.5
National Bank of Greece (NYSE: NBG) (29%) 6.3 0.4
Bank of Ireland (NYSE: IRE) (41%) N/A 0.1
Allied Irish Banks (NYSE: AIB) (70%) N/A 0.2
Deutsche Bank (NYSE: DB) (28%) 10.6 0.6
Royal Bank of Scotland (NYSE: RBS) (40%) N/A 0.4
Banco Bilbao Vizcaya (NYSE: BBVA) (27%) 6.0 0.8

Sources: Google Finance, Yahoo! Finance. N/A = not applicable.

Don't get me wrong -- each of these banks are cheap, but they are certainly cheap for a reason. Ireland's banks have needed cash infusions and government backstops in order to stop the bleeding. Banks from continental Europe have a lot of exposure to the PIIGS. Spain is suffering from a serious real-estate bubble and has seen stagnant unemployment.

That being said, I've had my eye on Banco Santander for quite some time now, urging readers to look beyond the headlines and recognize what a great company this really is. Despite problems with Spanish savings banks that are dealing with lower deposit rates, Santander is a truly global giant, with more than 40% of profits coming from Latin America and only 12% coming from Spain. Its core ratio remains at a healthy 9.2%, and it's been witnessing earnings growth in places like the U.S. and Brazil.

If the company can continue to distance itself from the domestic woes of its country and political system, this could be a great stock to grab while it's still dirt cheap. And in the meantime, feel free to benefit from its 6.5% dividend.

Interested in how these companies are going to fare during the current stock crash? Add them to your watchlist to get the latest commentary and analysis!

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Jordan DiPietro owns shares of National Bank of Greece. The Motley Fool owns shares of National Bank of Greece. 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.