September 19, 2008 / 8:18 AM / 11 years ago

Bank of Ireland denies Santander approach

DUBLIN/MADRID (Reuters) - Bank of Ireland BKIR.L on Friday said it had not been approached by any potential buyers, following a media report that it was being eyed by the eurozone’s largest bank Santander (SAN.MC).

“Bank of Ireland notes recent media speculation and categorically confirms that it has not received an approach from, nor entered into discussions with, Banco Santander or any other party,” Bank of Ireland said in a statement.

Bank of Ireland shares were almost 46 percent higher at 1307 GMT shortly after the statement, amid general banking sector euphoria on hopes for a U.S. taxpayer-funded plan to mop up toxic mortgage-related debt. Santander was 13.4 percent higher.

Irish radio station Newstalk had quoted senior market sources as saying the Spanish bank, whose international reach and relatively cautious lending during a property boom has left it in a strong position, was considering the bid.

A Santander spokesman declined to speak about Bank of Ireland, whose exposure to a property market collapse in its home market has seen its shares tumble during the hurricane shaking world finance.

The Santander spokesman also refused comment on a report on the Financial Times Website that the Spanish institution was considering bidding for U.S. bank Washington Mutual (WM.N).

“Buying Washington Mutual makes much more sense for Santander than the Bank of Ireland, because it could use Washington Mutual’s branches to sell its consumer finance products ... There would be some substantial synergies in that sense,” Renta 4 analyst Nuria Alvarez said.

The FT cited people familiar with the matter as saying that five banks including Santander have come forward to evaluate WaMu’s financial records as part of an auction run by the Seattle-based savings and loans company’s adviser.

Apart from Santander, JPMorgan Chase (JPM.N), Wells Fargo, Citigroup (C.N) and HSBC (HSBA.L) are looking at WaMu’s books, the FT said.

Washington Mutual has a market capitalisation of $3.4 billion compared with Santander’s $89.2 billion, according to Reuters data. Bank of Ireland has a market capitalisation of $5.5 billion.

Sebastian Orsi, analyst at Merrion Landsbanki, said Bank of Ireland’s strong position in its home market and UK operations, including business banking and mortgages, meant it had something to offer a potential buyer.

But the current state of global markets and relatively small size of the Irish market meant a bid from a big global banking player seemed a distant possibility at present.

“I wouldn’t say it is an impossibility but I would be surprised if there were to be a bid,” Orsi said.

SANTANDER’S AMERICAN AMBITION

Santander’s U.S. growth ambitions have been limited to its just under 25 percent stake in Sovereign Bancorp Inc and a foray into consumer finance with the purchase of Drive Financial, specialising in auto financing.

“The Sovereign investment has really not panned out well for Santander which has been caught up in a battle with dissident shareholders at the U.S. bank” who did not want it to fall under the control of a Spanish financial institution, a Madrid-based fund manager said.

Santander agreed to buy an initial 19.8 percent stake in Sovereign in October 2005 and has until mid-2011 to exercise an option buy the rest.

Over the last three years, Santander’s domestic rival BBVA (BBVA.MC) has expanded rapidly in the United States, spending more than $13 billion buying Laredo National, State National, Texas Regional and Compass.

Last week, Santander lost out to Deutsche Bank in a bid for Deutsche Postbank’s DPBGn.DE Postbank arm.

Both Ireland and Germany have been slated by analysts as target markets for Santander, as it continues on the acquisition trail, taking advantage of the sharp drop in banking share prices as a result of the global credit crunch.

In July, Santander agreed to buy UK mortgage lender Alliance and Leicester for about 1.3 billion pounds in shares, about half what it would have cost in late 2007 when talks were reported to have floundered.

“Santander is still on the acquisition trail, and having lost out in Germany, it could well be looking at WaMu,” said a U.S. asset manager who did not wish to be named.

Additional reporting by Paul Hoskins, Robert Hetz and Andrew Hay; Editing by Hans Peters

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