Qatar on pole position as it plans swoop for stake in second major UK bank

One of the world's most acquisitive sovereign wealth funds is in early negotiations to pick up a cornerstone stake in a second leading British bank.

Qatar Holdings, which already has a 7 per cent holding in Barclays, is believed to be seriously considering taking a stake in the UK arm of Santander, the Spanish banking major, when it floats before the end of 2011.

The wealthy Gulf state's investment vehicle splashed out $2.72 billion (1.7bn) last year for a convertible stake in the Brazilian business of Santander, Banco Santander Brasil.

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The Qataris subscribed to a bond issue that will convert into a 5 per cent stake in the equity of Banco Santander Brasil in three years time, and are now said to be interested in taking a holding in Santander UK.

It is thought possible that the stake may be acquired before this year's flotation of the business, which the City has valued at about 15bn.

Santander, which has experienced difficult trading in its Spanish home market in the past two years, made its first moved into the UK with the 9bn acquisition of Abbey National in 2006.

The Spanish bank, now headed by Ana Patricia Botin, one of the dynasty that has shaped the group's development over many years, then mopped up Alliance & Leicester and the branch business of Bradford & Bingley during the financial sector crisis.

Qatar's other major stakes in British firms include 26 per cent of supermarket major Sainsbury's and 15 per cent in the London Stock Exchange. It also bought the famous Harrods department store for 1.5bn last year.

It also owns 9 per cent in Swiss-American investment banking giant Credit Suisse.

British banks have become more popular with sovereign wealth funds as investments in recent years.

China Development Bank has 3 per cent of Barclays, while Temasek Holdings, the Singapore government's investment arm, has 2 per cent of the bank, acquired at the time of Barclays bid battle with Royal Bank of Scotland for ABN Amro in 2007.

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Both Qatar Holdings and Santander declined to comment yesterday.

Analysts said one of the advantages for Santander of getting the Qataris on board would be to drum up wider support for the float of the UK business.

The listing would mark a return to the market for the British banks that the Spanish group snapped up before implementing a strong cost-cutting programme to eliminate duplication.

Together they make up Britain's fifth-biggest bank behind Barclays, Lloyds, HSBC and Royal Bank of Scotland.Qatar is also reported to be in talks over providing up to 50 million to develop Silverstone, the home of the British Formula One Grand Prix.

The British Racing Drivers' Club, owners of the Northamptonshire track, has appointed PricewaterhouseCoopers to handle the talks with the Qataris as the club plans a massive redevelopment including a hotel and drivers' academy.

A spokesman for the club refused to comment on the involvement of the Qataris but said talks were ongoing with potential investors.

Qatar Holdings is the direct investment arm of the Qatar Investment Authority, the emirate's $85bn sovereign wealth fund set up in 2004.

The Gulf state's fabulous wealth is based on vast natural gas reserves.