Two Giant Spanish Banks Could Tumble Hard

Last August, an article I published on DailyFinance highlighted that something seemed amiss with two international banking giants headquartered in Spain: Banco Santander (STD) and Banco Bilbao (BBVA) were buying up foreign banks, even as conditions in their home country worsened dramatically. Instead of buckling down to face an inevitable spike in loan losses on existing business, the banks expanded their balance sheets through acquisitions and became more leveraged.

But after a string of relatively benign months for equity markets, investors have recently grown skeptical of these two companies and sent shares down sharply. Santander shares have dropped 17% since the end of August, and Banco Bilbao shares are off 26% over the same period.