Thousands of Abbey jobs at risk

Thousands of Abbey jobs at risk

Thousands of IT and head office jobs at Abbey were on the line last night after the bank confirmed acceptance of the £8bn offer from Spain's largest bank.

Banco Santander Central Hispano refused to be specific about the extent of the cuts to Abbey's 25,000 staff but admitted it expected to achieve €450m (£300m) of savings over three years through rationalisation of head offices and computer technology.

In persuading Abbey to back its bid, Santander hopes to become one of the world's top 10 banks and the fourth largest in Europe. It succeeded in winning Abbey's approval after a frantic weekend of negotiations after the deal was leaked on Friday, but other suitors may be waiting in the wings.

Luqman Arnold, Abbey's chief executive, said the takeover would make the bank a "formidable competitor" for its domestic rivals. The Abbey brand will be retained.

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But Santander paid the price for the ambition of its chairman, Emilio Botin, when the Spanish bank's shares fell in Madrid, cutting the value of its offer to Abbey's shareholders.

Abbey investors will get one share in the Spanish bank plus 25p in cash and 6p for the dividend differential between the two banks.

While this valued Abbey at 578p a share when the offer was announced yesterday morning, it had fallen to 542p by the close yesterday. If the 6p dividend differential is included, the early offer stood at 584p and had fallen to 548p by last night.

The City was divided on whether Abbey's closing price last night of 557p - higher than the value of the Santander bid but 23p below Friday's 580p close - indicated that a rival bank would try to scupper the deal.

The takeover of Abbey is part of a dramatic change in the hierarchy of Britain's banks, which has seen Barclays and Lloyds TSB eclipsed by their domestic rivals - such as Royal Bank of Scotland - over the last five years in terms of market value.

Royal Bank of Scotland and Lloyds TSB may be interested in Abbey, but would face a competition investigation. Three years ago Lloyds offered £13 a share for Abbey but saw its bid blocked by the regulatory authorities.

Overseas bidders could also be interested, with Citigroup of the US mentioned as one potential predator.

Derek Mitchell, a director of UK equities at ISIS Asset Management, said: "I do expect there to be further interest simply because this is a one-off opportunity to get retail market share in the UK."

Nick Lord, banking analyst at Deutsche Bank, said he was "not dismissing entirely" the possibility that another bid could emerge but James Leal, banking analyst at Teather & Greenwood, admitted he thought it was less likely that a rival bidder would emerge.

Mr Arnold, who stands to make about £3.3m on share options from the deal, portrayed the process as similar to Wal-Mart's takeover of Asda.

"When Wal-Mart came in and turbo-charged Asda, I don't think customers felt they were dealing with a foreign company at that point. That's what I would like Abbey customers to feel," said Mr Arnold.

He was parachuted in to Abbey two years ago to unravel an overly ambitious expansion into bond investments and life insurance by his predecessors.

Stephen Hester, the chief operating offer involved in the turnaround strategy that yesterday allowed Abbey to show it had made a profit for the first time in two years, is leaving to be chief executive of British Land. The interim profit was £350m, against £144m loss last time.

At a packed press conference in London attended by 60 journalists flown in by Santander from Madrid, the Spanish bank's chief executive, Alfredo Saenz, described the Abbey takeover as a "once in a life time chance".

He said British banks made profits three times of those in France and seven times those in Germany. He also outlined five "first objectives":

· simplify product range;

· reinforce branch network;

· reinforce strong sales culture;

· optimise efficiency levels;

· finalise disposal of non-core assets.

Mr Botin, who along with his Santander colleague Juan Inciarte sits on the board of Royal Bank of Scotland, tried to play down concerns that there could be a conflict of interest if he retained his seat on the Scottish bank's board once the takeover is completed. He also quashed speculation that Santander would sell off its 5% stake in RBS.

Sir George Mathewson, the RBS chairman, also has a seat on the Santander board but absented himself from Sunday's board meeting at which the terms of the deal were finalised. RBS refused to give an explanation.

How the numbers stack up

Santander's global reach

UK

Abbey

Market share 11%

Branches 741

Spain

Santander/Banesto

Market share 18%

Branches 4,369

Germany

CC Bank

Market share 16%

Branches 54

Brazil

Santander Banespa

Market share 4%

Branches 1,874

Chile

Banco Santander Chile

Market share 18%

Branches 370

Portugal

Grupo Totta/Banco Santander Portugal/BSN

Market share 11%

Branches 670

Mexico

Grupo Santander Serfin

Market share 14%

Branches 1,018

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