Spanish Bank Santander Buys U.K. Mortgage Lender For $2.6 Billion

July 14, 2008 8:12 p.m. EST

London, England (AHN) - British mortgage firm Alliance and Leicester has been bought by Spanish bank Santander for $2.6 billion. With the new owners, the specter of job cuts arises as the new owner announced on Monday plans to merge it with another mortgage lender, Abbey, which Santander also owns.

The merger would make Santander, Europe's second largest bank next to HSBC, in control of 14 percent of the British mortgage industry. The soon-to-be merged companies would become the U.K.'s second largest behind Halifax.

Prior to the buy-in, Alliance's shares had dipped by more than 80 percent in 2007. The announcement of the sale led to an overnight increase in Alliance's shares to 325 pence from 219.5 pence.

Jobs are expected to be axed with the purchase, which would save the Spanish bank $360 million (180 million pounds) a year. When the bank bought Abbey National in 2004, Santander reduced its work force by more than 4,000 employees.

Roy Brown, acting chairman of Alliance, said, quoted by the Guardian Unlimited, "The board is acutely aware of the significant external risks presented by the deterioration in economic conditions and the continuing turbulence in the financial markets. Against that background, the proposal from Santander represents value for shareholders and the combination of A and L with Santander's U.K. operations is an excellent fit."

The merger is also expected to consolidate Abbey's 705 branches and Alliance's 254 units.