UPDATE 2-Sabadell talking to possible insurance partners

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By Robert Hetz

SANTANDER, Spain, June 19 (Reuters) - Spain's Banco Sabadell (SABE.MC) is in talks with international insurers about the sale of a stake in its insurance business, the bank's chairman said on Thursday.

"There have been a lot of companies interested. We're talking to a number of them at this time .... Our new partner will be international and one of the world's leading insurance companies," Sabadell's Josep Oliu said at a conference in northern Spain.

He added that the sale was not guaranteed.

On Wednesday, Spanish insurer Mapfre (MAP.MC) said it was not interested in Sabadell's insurance business.

Sabadell said in May it was considering selling a stake in its insurance business.

A banking source familiar with the situation said the Catalan bank had given a mandate to Deutsche Bank to sell up to 50 percent plus one share of its insurance arm, in a deal valued at between 1 billion and 1.25 billion euros ($1.56-1.95 billion) net.

Sabadell's insurance unit managed a total of 6.64 billion euros in assets at end 2007, including life and non-life insurance policies and pension funds.

Oliu said he expected consolidation among small and medium-sized banks in Spain as a result of the economic slowdown and credit crunch.

"There are two big banks and one big savings bank here. All of the rest of us will feel pressure from the market and on profits," Oliu said, adding that Sabadell would be open to opportunities, but that it would only take part in deals by mutual consent.

One possibility for Sabadell would be integration with Banco Popular (POP.MC), Oliu said, but added that this was not being actively considered at the moment.

Sabadell shares were down 0.35 percent to 5.67 euros at 1109 GMT, at a time the Ibex share index was up 0.24 percent. (Reporting by Robert Hetz; writing by Jason Webb and Judith MacInnes, editing by Will Waterman)