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Tickers in this Article: STD, RBS, GE, C, WB
Spain's Banco Santander (NYSE:STD) became well known because it avoided investments in risky and difficult to understand securities, but even this conservative reputation couldn't shield the bank from the Dow's 7% drop below the 9,000 mark Thursday. Although I can't say when the global downward slide will stop, I can reveal that Santander's risk averse approach to banking led to results for the first half of the year investors with a 3-5 year time horizon can appreciate.

Retail Focus
Banco Santander has focused on building its business by focusing on retail banking basics. By focusing on attracting customer deposits and making loans to borrowers who are likely to repay, Banco Santander was able to increases its net operating income for the first half of the year by 28% to 8,853 million euros ($12 billion) led by increases in commercial revenue (loans to businesses) and net interest income.

Acquisition Adding to Profit
During the first six months of the year Santander finished its acquisition assets from the Royal Bank of Scotland (NYSE:RBS) and certain assets from GE Money, General Electric's (NYSE:GE) commercial finance division. Santander also finished its acquisition of Banco Real assets in Brazil. By geographic region Latin America (including Brazil, Mexico and Chile) represented 32% of Santander's profits during the first half of the year, while Continental Europe represented 54%. Santander's profit for the first six months of the year totaled EUR 4,730 million ($6.43 billion) representing a 22% increase over the same period a year ago.

Possible Dilution Notice
Investors should note that Banco Santander held a special meeting at the end of September to vote on issuing 143 million new shares of stock. The additional capital from the stock sale could provide additional funds to help with the acquisition of banks struggling through the current economic downturn. The additional shares will also mean that existing shareholders' shares will be worth less after the new shares are sold.

Can Any Bank Really Be Trusted Now?
Banco Santander has avoided subprime mortgages and other collateralized debt obligations that have gotten competitors like Citigroup (NYSE:C) and Wachovia (NYSE:WB) into trouble, but its stock has still fallen 38.88% since the beginning of the year. Although the central banks of countries like the U.S., Canada and Europe have begun to move in unison to address the tightening of credit markets the recovery timeline for financials could stretch out over years rather than months. (For a good read check out CDOs And The Mortgage Market.)

Final Thoughts
Banking has a tough road ahead of it before the fiscal stimulus actions taken have a positive effect. Banco Santander has differentiated itself by not chasing the profits of exotic investments, but only investors willing to wait out an extended recovery period should consider an investment at this time.

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