I attended an investment conference last week and listened to a number of business updates from leading financial institutions. The vast majority are staying extremely conservative with their lending activities and are waiting for more tangible signs of an economic recovery before they start shifting gears from surviving the credit crisis to growing their operations.

This sentiment is similar across the United States and throughout the world, with the vast majority of big banks taking a wait-and-see approach in regard to the future economic climate. With so many in the industry playing defense, it takes a brave firm to go on the offensive and stand against the crowd.

Banco Santander (NYSE: STD) is one those rare banks and understands that being bold when others are fearful can be a wonderful strategy for picking up business on the cheap. Santander has succeeded where other banks have failed in two ways: one is through organic growth and aggressively taking on deposits, which forms the capital to make loans and earn a spread in the form of a net interest margin, and the other is through acquiring best-in-class assets during the downturn.

Santander is pursuing both, but focusing on buying market share as more beleaguered banks are desperate to sell assets and raise capital to appease regulations that are requiring more conservative bank balance sheets. Additionally, many made loans that have gone bad and stand little chance of being repaid. As a result, these banks must raise liquidity to shore up their finances.

Santander focuses on commercial banking and boasts 91 million customers through nearly 14,000 branches around the world. As of last year, the bank counted itself as the fourth largest in terms of profitability and by market capitalization. The bank also provides asset management activities and sells insurance.

To give you a feel for just how large and profitable Santander is, last year total assets exceeded 1 trillion euro, or nearly $1.3 trillion based on current exchange rates (the company reports its results in euro). Net income came in at about $12.1 billion while return on equity was very decent at nearly 14%. Its Tier 1 capital ratio (basically a ratio of common and preferred equity, plus some adjustments as a percent of assets) exceeded 10, which is ahead of many peers and leaves the balance sheet in good shape.

Santander should be struggling royally — it is based in Spain, which is reeling with close to 20% unemployment and the bursting of one of the largest housing bubbles in the world. Fortunately, Spain represents only a fraction of its business and is one of nine primary markets, the others of which include Portugal, Germany, the U.K., Brazil, Mexico, Chile, Argentina and the U.S. As such, it is one of the most globally diversified financial institutions in the world.

Santander’s acquisition-hungry focus recently led it to Poland, where it won an auction to buy a controlling stake in Polis Bank Zachodni WBK from Allied Irish Banks for $3.8 billion. It has also recently bought business in the U.S., a minority interest in Mexico and bank branches in Germany, and the U.K. 

On the dividend front, management returned $6.3 billion to shareholders last year. This represented +2.2% growth in the payout from the previous year. Over time, the bank says it aims to pay out 50% of earnings as dividends, and therefore should be able to build off the already-respectable current dividend yield of nearly 4.5%.       

Action to Take —> Santander is rare in that it is growing while other banks are shrinking. This is paying off for shareholders currently and should further boost their returns when the global economy reaches a sustainable recovery.

For the full year, analysts expect of the bank to earn $1.36 per share. At current share prices, the stock’s forward P/E ratio is below 10 and represents a very reasonable entry point for investors.

The bank’s return on equity (ROE) exceeded 20% before the credit crisis. New regulations will hamper bank profit prospects going forward, so estimating a more conservative steady-state ROE suggests earnings of about $15 billion, or $1.42 per ADR (1 ADR share equals 1 ordinary share). Applying a conservative multiple of 12 gets translates to a share price of $17, or +34% above current levels, which doesn’t even factor in the considerable upside from Santander’s active acquisition strategy. It’s not at all unreasonable to see the stock doubling within the next few years.