Banco Santander/Abbey National
In what would be the biggest cross-border bank merger in Europe, Banco Santander Central Hispano of Spain has announced a deal to acquire Abbey National Bank in the UK. The $16 billion deal will create the tenth largest bank in the world.
Banco Santander is the #1 bank in Spain, while Abbey National is #6 in the UK and #2 in mortgages in that country. Abbey National has 16 million customers. The biggest previous such deal was the UK's HSBC's acquisition of Credit Commercial de France in 2000. Abbey has been the object of a number of suitors, including British Lloyd's TSB, the Bank of Ireland, and National Australia Bank.
According to a Wall Street Journal article ("Britain's Abbey National Agrees to $16.29 Billion Santander Bid," 7/26/2004), this acquisition may inspire further European dealing:
A deal with Abbey National could put renewed pressure on European banks to take more aggressive steps to expand. In the past several years, once-mighty names like Deutsche Bank AG and Lloyds TSB Group PLC have been eclipsed in the global rankings by HSBC and Citigroup. European banks, despite large cash piles, have few growth options. While some banks have turned to the U.S., such forays usually involved paying too much for an asset or being outbid by stronger U.S. rivals.
The same story notes that while European banks have failed in acquiring investment banks in other countries, the Santander/Abbey deal indicates a newfound interest in retail (consumer) banking, Abbey's strong suit. This parallels similar motivations in the US bank merger spike.
Founded in 1857, Banco Santander has pursued an aggressive course of expansion in recent years. The company became number one in Spain with the 1999 acquisition of Banco Centro Hispano, to add to its purchase two other major Spanish banks. In addition to a solid presence in Portugal, the company has bought 13 banks in 11 Latin American countries. Of its subsidiaries, Banco Santander Santiago is the #1 financial institution in Chile. Banco Rio de la Plata is the second largest in Argentina, while Banco do Estado de São Paulo is a leading Brazilian bank. Banco Santander Puerto Rico Santander and Serfin of Mexico are major players in their markets as well, and the firm has an alliance in Mexico with Citigroup. The banking group also has significant minority share in Spanish telecommunication and cable TV firm Group Auna.
One thought is that Banco Santander is pursuing Abbey is the volatility of its Latin American banks, which now comprise over one-third of its income. In fact, Grupo Santander has had major losses in the hundreds of millions of dollars over the past two years, thanks to Latin American problems, though it will probably be in the black this year. The thought is that a solid investment in a stable European country will lessen the year-to-year swings.
