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UPDATE 1-Santander denies plan to sell stake in Brazil unit
* Sale of stake in Brazil lacks basis, Santander says
* Mulls 30 pct-40 pct stake sale in Brazil unit-report
* Estado says Bradesco, Banco do Brasil seen as bidders
* Shares of Santander Brasil, parent lender gain Friday
SAO PAULO, May 25 (Reuters) - Banco Santander, Spain's largest lender, denied a news report that it was considering the sale of a stake on its Brazilian unit to raise capital to cover mounting losses.
The Brazilian newswire Agência Estado had said Madrid-based Santander might sell between 30 percent and 40 percent of its Banco Santander Brasil subsidiary citing unnamed sources.
Banco Santander and Santander Brasil both denied the report.
Speculation over a potential deal has helped spur a 6 percent jump in the stock in the past month.
State-controlled Banco do Brasil, the nation's largest bank, and Banco Bradesco, Brazil's second-biggest nongovernment bank, might be likely bidders for the stake, the news wire said.
A spokesman for Osasco, Brazil-based Bradesco declined to comment on the report. Banco do Brasil said the report lacked any basis.
The Estado report comes as political pressure is mounting on local lenders to lower borrowing costs amid climbing defaults and flagging demand for new credit. Analysts consulted by Agência Estado valued Santander Brasil at between 100 billion reais and 160 billion reais ($49.5 billion to $79 billion).
Over the past month, Brazilian President Dilma Rousseff toughened her tone and demanded private-sector banks bolster lending and cut rates to help kick-start Latin America's largest economy. Banco do Brasil and Caixa Econômica Federal, Brazil's No. 1 mortgage lender, have stepped up lending and cut interest rates as a way to force their rivals to lower borrowing costs.
Shares of Santander Brasil rose 0.8 percent to 15.95 reais in São Paulo, extending the stock's 12 percent gain in the past year, after shedding about one-third in 2011. Banco Santander rose 0.2 percent in Madrid trading.
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