Spanish bank may bid for AIB

SPANISH banking giant Santander, said to be interested in deals involving AIB’s British and US operations, could potentially be a bidder for the entire AIB group.

A report in the Financial Times said recent talks involved Santander’s US subsidiary, Sovereign, merging with M&T bank in the US in a stock-based deal.

The deal could net AIB – which is trying to raise billions in asset sell-offs – about €1.2 billion, for its 22.5% stake in M&T.

Discussions about the deal have stalled due to disagreement over who would ultimately control the new enlarged bank.

If sold on the open market, AIB’s M&T minority holding would fetch about €200m less, analysts said.

Santander is also currently linked to the purchase of some of AIB’s asserts in Britain. The bank is believed to the lead bidder for a network 40 AIB branches that includes a loan book with an estimated value of €1bn.

Given its broadening interest in assets held by AIB, a potential bid for the entire bank was not out of the question.

“You couldn’t ever rule it out” said Ciaran Callaghan, banking analyst with NCB Stockbrokers.

Prior to the credit crunch and the banking crisis, Santander, back in 2006/’07, was identified as a potential buyer of AIB, he said.

As the banking crisis deepened, analysts also identified it as a group strong enough to buy Bank of Ireland if its strategy was expanded to embrace the Irish market.

“However, a disposal of AIB’s stake on the open market may have to come at a discount,” said Mr Callaghan.

Santander has thrived in the current crisis and looks determined to continue developing its overseas operations, he said.

The shareholder agreement gives M&T the right of first refusal on any AIB disposal, or alternatively the shares must be “widely dispersed” but if Sovereign/M&T can strike a deal, it would facilitate a sale.

The two regional banks are broadly similar in scale based on assets: Sovereign had total assets of $72bn (€58bn) at end of March, 2010, while M&T had $68bn.

The FT suggests that Santander would acquire AIB’s 22.5% stake in M&T, giving it a substantial stake in the enlarged entity.

M&T shares have risen by 25% year-to-date, notwithstanding AIB’s plan to sell its stake.