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Last week I wrote an article describing my admiration for Spanish banking giant Banco Santander
Negative sentiment continues for Spain
Investors are pretty much scared of all things Eurozone since the Greek bailout earlier this year, and more recently, the debacle that has brought Ireland to its knees. Allied Irish Banks
And today, Moody's Investors Service lifted its estimated loan losses for the Spanish banking system by 63% -- from $143 billion to about $233 billion. According to Moody's, the country's banks have only recognized about half of this figure so far, and it believes that they'll need an additional $22 billion in order to survive such a hit to the books. As stated by Moody's analysts Jose Alberto Postigo and Antonio Garre, "The severe economic contraction that Spain has faced since the second half of 2008 is expected to depress growth into 2011. As a result, banks will face a challenging economic environment for a prolonged period of time, pointing to negative prospects for asset quality and earnings."
Why I like Santander even more
You would think that news like this would send shares of Santander and Banco Bilbao Vizcaya
What we might find is that some of the large, well-capitalized banks that have seen their shares hit hard are also the same ones that are trading at dirt cheap prices right now and could offer a great entry point for value investors.
For instance, National Bank of Greece's forward price-to-earnings ratio is 6.5, compared with the FTSE Greek Bank index 10-year average of 11.8. Santander's forward price-to-earnings ratio is 7.2 versus the FTSE Spanish Banks index's 10-year average of 11.4. Italy's Intesa Sanpaolo has a forward price-to-earnings ratio of 8.9 versus the FTSE Italian Banks index's 10-year average of 11.9.
In addition, Santander makes about 44% of its revenue from Latin America; Spain actually accounts for much less. But banks that have significantly more exposure to places like Spain or Greece, such as BNP Paribas or Societe Generale, haven't seen their shares sold off nearly as much.
It's for these reasons that I'm going to keep a keen eye on Santander, which I continue to think is one of the best investments around.
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Jordan DiPietro owns shares of National Bank of Greece. The Fool owns shares of Telefonica. 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.