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One Bank That Didn't Fumble The Last Decade

|Includes: BAC, Banco Santander S.A. (SAN)

Bank of America had a tremendous decade, up to the point where they overextended themselves, needed $20 Billion in government cash, and practically went insolvent. America's banks did a bad job of governing themselves, and the government sure didn't regulate them. The result? A financial catastrophe that nearly brought the biggest economy in the world to its knees. One bank, however, didn't have these problems: Banco Santander.

Banco Santander is the sixth largest bank in the world. It also has one quarter of the industry's average debt. Add on that it beats industry margins by 7.5%, and is growing faster than the industry averages. Another great thing about Santander is the exposure it has to emerging markets. Geography, however, is also a catch to Banco Santander. It is based in Spain, and still derives a significant portion of revenue on its home turf. This has led to a high degree of susceptibility to fears about Spain.

Considering these macro fears, it might make sense that Santander is trading at 12 times the last twelve months earnings. Now take the 4% dividend yield into consideration. If shares drop back to $10 from there current level around $12.50, the yield will be above 5%. In contrast, Bank of America's forward P/E is comparable to Santander's, but B of A isn't currently profitable, it has tons of bad loans on its books, and it has six times Santander's debt relative to equity. Bank of America also pays a dividend that pales in comparison to Santander's. There are other reasons to buy Santander when it drops back down to $10.

A look at the technical picture of Banco Santander right now: It has just risen over 25%, and this has been on steadily decreasing force. The volume now is half of what it was at the beginning of the current run. On top of that, it is overbought and hitting significant resistance. Multiple trendlines and multi-year resistance all coincide at the $12.50 mark, where shares are at right now. A drop back to $10 might take a little while, but it will be well worth the wait.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I plan to buy shares if once again trade at $10.