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Spain's Santander absorbs Banesto to save costs

Spain's largest bank, Santander, has announced it plans to absorb its majority-owned subsidiary, Banesto, making the once proud lender disappear as an independent entity. Hundreds of offices will be shut down.

Spain's largest bank, Santander, on Monday ushered in a new round in the restructuring of the country's banking sector by announcing the complete takeover of its 90-per-cent-owned subsidiary, Banesto, one of Spain's oldest lenders.

It said the merger would cost Santander some 260 million euros ($338 million), but would eventually help it to cut operating costs.

Santander estimated it would save about 520 million euros through the merger which would be completed by May 2013. It added the move would result in the closure of 700 Banesto bank offices across the country.

Market reaction

Santander acquired 90 percent of Banesto in 1994, following the discovery of a massive financial shortfall that saw the bank's chief, Mario Conde, sentenced to 20 years in prison.

Banesto still has about 8,000 employees. But although it became clear on Monday that the lender would not survive as a separate entity, Santander failed to comment on how many jobs were at stake as a result of the merger.

Following the announcement, Santander shares fell by 0.6 percent, with Banesto shares going up 23 percent on the Madrid Stock Exchange.

Santander argued the merger would eventually boost its growth and give clients access to a broader range of financial products.

hg/ kms (Reuters, dpa)