Santander may float 25pc stake in UK banking interests

The plans could see a return to the stock market for the British trio bought by Santander – Alliance & Leicester, Abbey and the savings business of Bradford & Bingley.

The Spanish firm – which recently completed the rebranding of its Abbey and B&B branches under the Santander name – is said to be looking at selling a minority 25 per cent stake in the British business.

That would give it the funds to bolster its position in Britain by buying up 300 branches due to be sold by Royal Bank of Scotland to ease European competition authorities.

The capital raised by the float could also help Santander weather the losses likely from its exposure to the ailing Spanish economy. The Spanish group has grown rapidly since it entered Britain’s high street in 2004 with the acquisition of Abbey, although it is likely to face competition for RBS branches from Virgin Money and National Australia Bank, which owns Yorkshire and Clydesdale banks.

Its deals for A&L and the B&B business in 2008 has given it 25 million customers and 1,300 branches.

The bank is Britain’s second biggest mortgage lender and third biggest savings provider.

But Santander – which declined to comment on the reports – has also announced plans to take on the big four high street banks on current accounts.

It hopes to gain market share by undercutting rivals through offering market leading products, and by cross-selling as many different products as possible to existing customers. The bank has launched a fee-free Zero current account for existing customers and last week said it had opened an extra 1.1 million new bank accounts last year, slightly above its target.

The group posted a 30 per cent rise in annual profits at its British arm to 1.54bn in the year to December 31.

Last month Santander erased the B&B and Abbey names for good from the high street. It expects to complete the rebranding of A&L later this year.

The move signalled the end of B&B’s 150-year presence on the high street, although its loan book remains in state ownership and is unaffected by the rebranding.

Santander bought B&B’s 197 branches and 141 agencies, plus its 20bn savings book, for 612m in October 2008 when the bank’s loan book was nationalised.