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Banco Santander s red and white flame logo popped up around theworld when Spain was booming, but now the country s fortunes haveturned, the global bank is being scorched by the domestic blowback. It has come a long way since it was founded in 1857 in the northernSpanish port from which it takes its name, building a strongpresence in mature markets such as the U.K., and growth marketsincluding Brazil, Mexico and Poland. But it seems investors and depositors alike are struggling to seepast the turbulence in its home market. Its shares have dropped about 40 per cent in the last year as thebank, along with Spanish rival BBVA, has been lumped together withthe rest of the country s domestic-focused lenders, which are inurgent need of more capital after a property boom abruptly turnedto bust. This was evident last month when British customers at Santander sU.K. subsidiary took fright and withdrew about 200-million($308-million U.S.) in deposits, spooked by the misfortune ofSpanish lender Bankia, which the government in Madrid was obligedto rescue. Santander and BBVA are in another league. Whatever they do inSpain has a limited impact on their balance sheet, and it (theshare price fall) is unjustified collateral damage, a seniorMadrid-based financier said. Dig into its profitability, and from Brazil to Boston, Santander spresence in 10 major markets has kept it relatively insulated fromthe worst of the Spanish real estate collapse and the euro zonecrisis. Over the past five years, it has made 40.5-billion inattributable profit and paid out 24-billion to shareholders individends, while many of its rivals have cut or stopped theirpay-outs. In its most recent quarterly figures, 56 per cent of its profitscame from high-growth emerging countries such as Brazil and Mexico,while only 13 per cent came from Spain and Portugal. That has not translated into the bank s price to book ratio of0.53 - a measure of its shares against the value of its assets -which lags behind safe-haven banks such as HSBC , on 0.89, andJPMorgan, on 0.66, according to Thomson Reuters data. Even if Spain s downturn worsens - the economy is forecast toshrink this year and next - the country accounted for only 26percent of Santander s total assets at the end of March, about thesame as it has in Latin America and the United States, and lessthan the 29 per cent held in the U.K. While the bank is likely to set aside more for bad loans in itshome market after an external audit of Spanish banks commissionedby the government, few expect it to have to raise more capital. Banks like Santander will have to provision more, but Santanderwon t need more capital, one senior Madrid-based investmentbanker said. Although British depositors did pull out cash in May when fearsabout Spanish banks mounted due to a rapidly worsening situation atBankia, this amounted to just 1 per cent of customer deposits. That was in part due to Santander s move last December to mitigatethe perceived risk of being owned by a Spanish bank. The bank sBritish subsidiary decided to make any transfers out of Britainsubject to the consent of the U.K regulator, the Financial ServicesAuthority (FSA). With the full cooperation of Santander U.K, the FSA has in placearrangements which require the FSA to give permission to anytransfer of funds out of the UK by Santander U.K., an FSAspokesman said. Santander chairman Emilio Botin stressed in March at the bank sannual meeting that subsidiaries such as the U.K. unit were autonomous in terms of capital and liquidity . This structure has reassured some. You can t completely ignore the contagion from Spain and theheadline risk, but Santander UK should be able to operate as aseparate entity in a worst-case scenario, said Robert Montague,Senior Investment Analyst, European Credit Management, whichmanages $9.5-billion invested in European credit markets. In the case of Santander s business model, its subsidiaries arefairly independent in terms of funding, and its U.K operations alsoreport publicly on a standalone basis, Mr. Montague added. That has not stopped some depositors, notably a handful of localcouncils, from withdrawing their cash. But such moves areillogical, says Ben Bennett, credit strategist at Legal &General Investment Management, one of the U.K. s biggestinvestors. It s not something that s specific to its balance sheet that isputting it under pressure; it s just purely an association with aSpanish parent company, said Bennett. When you start talking about the worst-case scenario, the wholeargument is a systemic one. That s an added reason why it sillogical to target these banks in the UK which have exposure toSpain because actually ... you re probably questioning banks thathave nothing to do with Spain, he added. There has been no sign of a depositor flight from Santander inMexico, where the bank had customer deposits of 26.1 billion eurosat the end of the first quarter. The Mexican banking and securities commission said it was incontinuous contact with Spain s central bank as well as with thehead offices of banks that have units in Mexico and is confidentMexico s banking system insulates domestic subsidiaries fromdistress at their foreign parents. In Mexico we have worked for more than 15 years to create aregulatory framework for subsidiaries with clear rules oncapitalization and limited exposure to their parent banks, which webelieve is a strength of our banking system, a spokesman for theregulator said. It is a similar tale in Brazil, where there has been no sign of anydepositor flight. Santander has been overcapitalised in Brazilsince it listed publicly there in 2009. In the first quarter, theBasel ratio of Santander Brasil was 24 per cent, well above theaverage of 14-15 pct of its main competitors as well as theregulatory floor of 11 percent. As such, regulators are not concerned about Santander Brasil scapital position, despite occasional rumours that Santander isrepatriating capital to Spain. Local Santander executives have repeatedly denied this, andSantander Brasil CEO Marcial Portela recently said: The only wayto send money to headquarters is through dividends. Brazil remains a bright spot for Santander, representing 25 percent of the group s overall profit, surpassing headquarters inSpain last year. The bank expects this number to rise to 30 percent in the next couple of years. 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