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Santander eyes UK banks

Spanish bank Santander threw its name into the ring as one of several suitors for hundreds of branches and other assets from Britain's bailed-out banks due up for sale in the coming months.

The forced sell-off of over 900 high street branches and other assets has attracted dozens of potential bidders, including existing lenders and new entrants seeking to capitalize on a regulatory drive to increase competition.

The first major lot to come to market is expected to be more than 300 branches being sold by part-nationalized Royal Bank of Scotland in its race to get back to business as usual and limit potential damage from a drawn-out sale.

Nationalized lender Northern Rock, which completed its restructuring earlier this year, is expected to follow.

RBS has yet to distribute a full information memorandum but has sent out a “teaser” document to interested parties, who have until the end of the month to express an interest, people close to the matter said.

RBS was told by EU regulators late last year to sell RBS-branded branches in England and Wales and NatWest branches in Scotland in return for receiving government support, but has four years to do so.

“The policy of Banco Santander is to take advantage of opportunities,” Santander chairman Emilio Botin said at the opening of the first Santander-branded British branch, launching a Ł30 million rebranding campaign.

He said the group would also continue its “very significant” organic growth.

Santander, which stepped into the British market with the acquisition of Abbey in 2004, is now the country's second-largest mortgage bank and third-largest retail bank, with 10% of all branches and 25 million customers.

It boosted its position with two opportunistic purchases as the financial crisis struck, adding Alliance & Leicester and parts of lender Bradford & Bingley to Abbey.

Botin told reporters the outlook for Santander's British business was “very favorable” thanks to strong organic growth, and had generated “very, very positive” results in 2009.

Santander was due to publish 2009 results on February 4.

Britain has said it wanted at least three “new entrants” as a result of the shake-up and asset sale, hoping they will go to new or emerging players. That could restrict Santander's ability to participate in any retail purchases, but not in commercial banking -- a key growth area for the bank.

Richard Branson's Virgin Group is one of the most high-profile new arrivals in British banking, snapping up a small provincial bank last week to gain the license it needs to take current accounts and begin operating as a full-service lender.

Virgin has been contacted by financial institutions and private equity firms, hoping to team up for an eventual bid for assets or all or part of Northern Rock, one source close to the matter said, though the group is not expected to repeat its failed 2007 bid for the bulk of the lender.

Blackstone and Virgin declined to comment on a newspaper report Branson's group had contacted the private equity player over a potential move on Northern Rock.

Other new arrivals expected this year include Metro Bank, a start-up from US entrepreneur Vernon Hill, and Walton & Co, a bank backed by stockbroker Panmure Gordon, which kicked off plans to raise cash on Monday. Both are awaiting FSA approval.

Metro Bank is expected to focus on providing service through branches, while Walton is set to come to the aid of families and small and medium-sized businesses. (Reuters)