RPT-Santander still seen shopping after A&L buy

MADRID, July 22 (Reuters) - Santander's (SAN.MC) shopping habit is unlikely to be broken with British mortgage lender Alliance & Leicester ALLL.L and asset sales could be used to fund more acquisitions, analysts said on Tuesday.

In the last week, media have reported that Europe's second largest bank is planning to sell its asset management and insurance divisions for a total of 6-7 billion euros ($9.6-11.1 billion). Santander declined to comment.

While other global banks are selling assets to shore up their balance sheets in the wake of the subprime rout, the possible Santander sales are being seen as raising cash to fund growth.

"If the sales of the asset management and insurance businesses go ahead, Santander will definitely use the money to buy something," said Fox-Pitt, Kelton analyst Jagoba Garcia.

"It really has no capital restrictions nor is it in need of liquidity."

Santander had no direct exposure to subprime mortgages and has a reputation of being one of the world's best managed banks as it has maintained an aggressive but picky acquisitions policy.

With banking valuations falling and Santander in good shape, it was on the shopping trail again last week, agreeing to buy A&L for about 1.3 billion pounds ($2.61 billion) in shares -- about half what it would have cost in late 2007 when talks were reported to have foundered over price.

The question is where Santander will go shopping next.

"Colombia is one of the main areas in Latin America where Santander has no major exposure," said Caja Madrid analyst Javier Bernat. "Ireland and Germany are other possible target markets."

The German market has often been flagged as being on Santander's radar, with Dresdner Bank (ALVG.DE) and Postbank (DPBGn.DE) in the frame as possible targets. Citi's German arm was also mooted but was sold to France's Credit Mutuel Group.

EARLY DAYS

While some market players thought another deal would be along in short order, one source close to the situation said the asset sales were still in an early phase and that Santander was testing the water rather than trying to raise money quickly.

The insurance arm may be easier to sell than the asset manager as Santander's wide branch network would offer foreign insurers a rare opportunity to gain a strong foothold in Spain.

It would also cut costs for Santander, which would hive off the costly production side but keep control of distribution.

International insurers like AXA (AXAF.PA) have been named as possible buyers for the Santander unit after Zurich (ZURN.VX) bought half of Banco Sabadell's (SABE.MC) insurer this month.

Analysts at BPI said the insurance sale could also be timely for Santander ahead of the implementation of new Basel II regulations in January, which will force banks to deduct the book value of stakes in insurance from the capital base.

"Obviously it's worth looking to sell these assets sooner rather than later before everyone jumps on the bandwagon ahead of Basel II and the market becomes saturated," said another analyst. (Reporting by Judy MacInnes; editing by Elaine Hardcastle)