Santander is understood to be running the rule over a possible £2 billion bid for Clydesdale Bank to expand its presence in the UK.
The Spanish lender has reportedly been eyeing the Glasgow-based bank, which is owned by National Australia Bank (NAB), since the collapse last year of a £1.65bn deal to buy 316 branches from Royal Bank of Scotland.
Santander UK, which was not available for comment yesterday, has grown to become the UK’s fifth-largest lender through a series of acquisitions, including snapping up the former Abbey and Alliance & Leicester building societies.
The bank, headed by chief executive Ana Botin, is expected to launch its highly-anticipated stock market listing this year, which could value the business at around £10bn.
Acquiring Clydesdale, which also owns the Yorkshire Bank brand, would give Santander a stronger position in the small business banking market, particularly in Scotland and northern England. It is understood that no formal approach has been made to NAB.
A spokesman for Clydesdale said: “We don’t comment on market rumours or speculation.”
NAB is under pressure to improve its shareholder returns and group chief executive Cameron Clyne is due to unveil a strategy in March aimed at reducing costs by encouraging more customers to bank online.
Credit Suisse claimed last week that the group could boost its market value by up to AUS$4.5bn (about £3bn) by spinning off its loss-making Clydesdale division as a separately listed entity.
Analyst Jarrod Martin said such a deal would enable the group to achieve a “substantial exit” from the UK, while still giving its shareholders the chance to benefit from any recovery in trading. He said a newly-created Clydesdale Bank plc could debut with an estimated market capitalisation of about £2bn, which would place it around number 75 in the FTSE 250 index.
Figures released in October showed that Clydesdale slumped to a pre-tax loss of £183 million in the year to September – its first annual loss – after it was hit by a sharp increase in bad debts.
Clydesdale chief executive David Thorburn is currently overseeing a shake-up that will involve 1,400 job cuts by September 2015. The restructuring will also see the closure of business centres in the south of England to focus on its “heartlands” of Scotland and Yorkshire.
Last October, Santander UK posted a 27 per cent slump in profits to £372m in the three months to 30 September as it was hit by a mixture of funding and regulatory costs.
The bank took a £52m provision for costs relating to the derailed purchase of the RBS branches, and it also put aside £232m to cover potential mis-selling claims, including of derivative hedging products to small firms, interest-only mortgages and credit card protection.
It was reported yesterday that 11 of the UK’s major banks – including Clydesdale and Santander – face a total bill of more than £1.5bn to meet the costs of compensating businesses that were mis-sold complex interest rate swap products.