Spanish Bank May Buy Abbey National

Santander Central Hispano, the largest bank in Spain and Latin America, is near an agreement to buy Abbey National of Britain for about $15 billion, people familiar with the matter said.

A takeover of Abbey would be the largest cross-border banking deal in Europe since HSBC Holdings bought Credit Commercial de France for $18.2 billion in April 2000.

Santander plans to offer stock and cash to Abbey shareholders, said the sources, who declined to be identified.

Buying London-based Abbey National, Britain’s No. 2 mortgage lender, would give Santander 741 branches and 18 million customers in Europe’s biggest consumer credit market. Chairman Emilio Botin, 69, is tapping new markets to maintain earnings growth and help meet his forecast for a 15% profit increase this year.

Santander “has pretty much completed what it wants to do in Latin America and the Spanish market is competitive,” said Simon Adamson, an analyst at CreditSights Inc. in London who rates the bonds of Abbey and Santander as “underweight.”

“In order to grow further it’s really got to look outside of Spain,” Adamson said.

The purchase of Abbey would give Santander, based in Santander on Spain’s northern coast, about 11% of Britain’s $1.37-trillion mortgage market, where lending is growing about 15% annually, according to industry figures.

Abbey spokesman Matt Young declined to comment. A spokesman for Santander also declined to comment.

Santander is expanding in retail banking in Europe to help counter two years of declining earnings from Latin America. Botin in June told shareholders he expected profit this year to exceed $3.6 billion, up from $3.2 billion in 2003.

Botin, who’s headed Santander since 1986, is trying to make the company one of the world’s top 10 banks by market value.

The boards of both banks met Sunday to discuss the deal.