UPDATE 1-Santander nears deal as Chrysler financing arm -report

DETROIT, Jan 17 (Reuters) - Chrysler Group LLC is close to striking a deal with Spain’s Banco Santander to set up an in-house financing arm to be called Chrysler Capital, the Wall Street Journal reported on Thursday, citing unnamed sources.

The deal could be finalized in the next few weeks, the newspaper said.

Chrysler and Santander both declined to comment on the report.

Last month, Reuters reported that the two sides were nearing completion of talks on the deal and that Santander’s U.S. car financing subsidiary, Santander Consumer USA, would be involved if an agreement were signed.

If the deal is completed, Spain’s largest bank would replace Ally Financial Inc, a U.S. auto lender that is majority-owned by the U.S. government.

The report also said that the joint venture between Chrysler and Santander would be similar to an agreement Chrysler’s parent, Fiat SpA, has with French bank Credit Agricole SA.

Chrysler said last April that it would let its deal with Ally expire on April 30, 2013.

Ally has been the preferred lender for Chrysler auto financing since Chrysler’s bankruptcy in 2009.