“Bienvenido a España”, headlined the news as the European debt crisis crept its way back into the spotlight. Yes, the Euro crisis is back after several calmer-than-expected months, besetting investors who have witnessed near disaster in Greece and Italy, with concerns of financial stability around the Eurozone’s fifth largest economy, Spain.

If you look at the grand scheme of things, it would almost seem as though the Eurozone is running out of options. The Euro, which is backed by monetary and not fiscal union, has failed to recognize the different national and economic characters of its members as well as implement an exit strategy in the event that a member state found compliance unachievable. Perhaps the Eurozone’s consolidation programs need to be revisited? For sure, an unemployment rate of almost 25 per cent, a property glut and insignificant growth rates will definitely hamper such efforts in recession-hit Spain.

Even so, the Country appears to have accepted the fact that membership in the Eurozone may be the best thing as an exit would be costly. Returning to the Peseta would see the currency sharply devalued. While this is good for foreign trade, most of Spain’s obligations would need to be satisfied with a stronger Euro.

The pressure is already on as just last Friday in the wake of an International Monetary Fund (IMF) report, Spain asked the European Union (EU) for as much as (euro) 100 billion in loans to rescue its banking system, making it the fourth Euro member to seek a bailout since the start of the region’s debt crisis. However, Spain’s financial problems are not due to Greek-style fiscal profligacy. In fact, Spain’s current fiscal despairs are a result of an enormous housing bubble that caused huge economic implications. Arguably, it was the lower interest rates and easier access to credit provided by the Eurozone construct, which fuelled the size of the bubble. The Spanish government did nothing to regulate the frenzy as it hit the tax jackpot and recorded budget surpluses.

So where does this leave the global economy and financial markets? It is natural to assume that European financial stocks and especially Spanish banking stocks should be left out of the picture. However, you may be mistaken as this just might be the opportune time to pick up a few “diamonds in the rough” at discounted prices and trade the pain in Spain for portfolio gains.

On the heels of the European financial debacle, Spain’s largest Bank, Banco Santander SA, is actually looking significantly undervalued with a price-to-book value of 0.55. Santander is a multinational banking conglomerate and is also one of the largest banks in the world in terms of market capitalisation (currently US$54.28 billion) and boasts approximately 14,000 branches worldwide. Santander is relatively well-positioned when compared to its Spanish competitors. In fact, the bank posted a record of (euro) 6.28 billion for Q01 2012 Pre-Provision Profit amid the current troubled environment. However, it was forced to set aside a considerable provision to mitigate property exposure in Spain.

Do not let this daunt you as Santander’s earnings are well diversified. The largest contributor to the bank’s profits is Brazil, followed by Mexico and the United Kingdom. Spain is responsible for only 12 per cent of profits. Notably, the bank has a lot of assets outside of the region which it could sell to raise cash should the need arise.

The Eurozone crisis has also provided the company with great opportunities for acquisitions. Earlier this year, Allied Irish Bank (AIB) sold its 70 per cent stake in Poland’s Bank Zachodni WBK to Santander for (euro) 3.1 billion because it was short on capital. Santander now has majority stake in one of Europe’s economic bright spots, contributing to four per cent of profits. The bank has proved to be a good acquisitor with strong risk management practices, capable of controlling costs, maintaining an acceptable efficiency ratio (currently at 44.7 per cent), reducing loan exposure to troublesome markets, de-leveraging its balance sheet and taking measures to increase liquidity.

Without a doubt, the Eurozone crisis has depressed Santander’s stock price even as the book value of the company remains relatively stable. Its share prices are now bouncing around US$6 and have lost over 45 per cent of value year-over-year and almost 20 per cent year to date. Remarkably, the bank boasts a dividend yield of nearly 14 per cent, which in my opinion, makes it one of the best quality high dividend yielding instruments out there.

The bottom line is, though the European situation may be getting increasingly unsettling as Spain, Italy, Greece and France continue to cause tremors in the financial system, a wealth of opportunities have been unveiled. Fortuitously, times of market volatility, though painful, present tremendous investment opportunities for prudent investors. Truth to be told, headline news come and go, but finding well-managed, nimble companies like Banco Santander, with propensity to increase earnings, cash and dividends, will undermine distressed markets and add value to your portfolio. As Sir Winton Churchill’s old adage states, “The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity.” Which one are you?

Sutanya Chedda is a Wealth Advisor at Stocks and Securities Limited and can be reached via schedda@sslinvest.com