Savings

Santander look to expand US operations

The Spanish financial giant Santander, who own several banks such as the Alliance and Leicester and Abbey National in the UK, are currently involved in merger talks with the US-based M&T Bank. The move would give Santander a sizeable foothold in the lucrative US banking market. According to sources close to the discussions, there has been some disagreement over who should control the new concern, which would be able to draw on an estimated $150bn in assets and 1,500 branches based in the North-East of the United States. Whether this proves to be an insurmountable obstacle remains to be seen, but talks are at a fairly advanced stage, with both parties apparently keen to do the deal.

The proposed deal would see Santander’s existing American bank, Sovereign, merge with the Buffalo-based M&T in a stock-based deal. Also, Santander would purchase the 22.5% stake in M&T that currently belongs to Allied Irish Banks, that US regulators have demanded that they sell. This will give them a large stake in the new firm, and it is expected that they will inject some additional money into the company to fund a rapid expansion programme. Santander have been aiming to expand their US presence for a while now, and this deal offers them a unique opportunity to do so in a short period of time. Although Santander will begin with a minority stake, the aim is to build up enough of a stake to be able to take control of the company outright. This has been something of a sticking point for M&T, who are reluctant to hand over control of the firm.

M&T, a company in which top investment banker Warren Buffett has a sizeable stake, have $68bn in assets and 750 branches in Maryland, Pennsylvania, and New York, and have seen their share price rise by over seventy percent over the past year. However, the news that Warren Buffett had reduced his stake in the firm to 4.7% saw share prices fall by more than four percent. Santander’s first foray into the US market began five years ago, when they bought a 25% share in Sovereign, another North-East based bank. During the financial crisis of 2008, Sovereign was hit hard by losses made by its car loans business, and Santander seized the opportunity to buy the bank outright and restructure it, rather than letting it go to the wall. Santander offer a range of savings options and plan to be able to offer a similar range of services in the North-East of the US.