The Greek debt crisis sent the world’s financial markets reeling, particularly across the so-called “PIIGS” nations in Europe — Portugal, Italy, Ireland, Greece and Spain, five European countries considered to be in the most questionable financial shape.

The fear is that Greece’s debt problems might be just the beginning: In the financial world the fear is usually not about whatever’s happening but how what is happening is going to affect everything else. The EU bailout, however, helped allay concern and markets across Europe, as well as European stocks trading on American exchanges.

No one knows if this is just a temporary reprieve. In the meantime, however, what is perfectly clear is that the crisis has made some strong companies very cheap. Every sell-off creates bargains, and this one has created a whopper.

Banco Santander (NYSE: STD) is the largest bank in Spain and the third most profitable bank in the world. It derives 65% of profits from Europe and 35% from Latin America. (Spain accounts for about a quarter of the take.)

Santander pays quarterly dividends that have totaled $0.76 during the past 12 months, which translates to about a 7% yield. Dividends are paid in euros and converted to dollars for U.S. shareholders, so there is currency risk. But that potential negative certainly has a positive side: Santander is also a way to diversify away from dollar-denominated holdings.

#-ad_banner-#Santander fell more than -30%, from $14.77 in mid-April to under $10 in early May. The problem has been its exposure to Spain.

Spain is in a deep recession brought on by the collapse of the housing industry. Unemployment is more than 20%. Based on lower estimated GDP growth and higher fiscal deficits relative to its European peers, Standard & Poor’s lowered the country’s sovereign debt rating to “AA+” from “AAA” in January 2009. S&P lowered the rating again in April, this time to “AA” with a “negative” outlook.

S&P also reduced its estimate of Spain’s five-year estimated average GDP growth rate to +0.7%, from +1.0%. S&P said it considered the possibility that Spain’s public and private borrowing cost would rise as a result of downgrades, further slowing growth.

Santander shares fell as a result of the bank’s exposure to the Spanish economy. Then the crisis in Greece came along. Now, the selling appears to have gone too far. Judging by the drop in its stock price, you’d think Santander did all its business in Spain. That’s not the case: Three-quarters of its business is outside of Spain, including about 35% from fast-growing Latin America, where Santander has a greater market share than any other bank.

Largely because of its geographic diversification, Banco Santander was not obliterated during the global financial crisis. Prudent management and tough domestic regulation helped it steer clear of the toxic assets that were so disastrous to other large banks in the United States and Europe.

In the first quarter ended March 31, Santander exceeded analysts’ expectations. Profits rose +5.7%, to 2.22 billion euros. Profits were driven by growth in Brazil and higher net interest income from lower interest rates. Profits were flat for 2009 versus 2008, but that amounts to a solid and resilient performance given the global recession. These are not the financial results of a bank that’s struggling amid the weak Spanish economy.

The crisis in Europe could continue, and stocks could continue to fall. Buying good companies that are out of favor, however, has proven to be a good strategy during the long run. Part of buying an out-of-favor stock is risking further downside. But, Santander is a good, solid bank with strong prospects for the future, as 44% of revenues are earned in emerging markets.

Action to Take –> Consensus analysts’ estimates are for Santander to grow earnings more than +18% next year and by a strong average of +12.4% during the next five years. And, the bank is dirt cheap. The stock currently sells at less than seven times projected 2009 earnings and yields 7%. Longer-term investors should take a close look.