A&L shares up on takeover report

See A&L's share price

Shares in UK bank Alliance & Leicester have jumped 16% on reports that the lender held talks last month about a takeover by Spanish bank Santander.

The Financial Times said that although the talks in December faltered over the price, Santander has not ruled out resuming negotiations with the UK bank.

Reports said the proposed deal valued A&L at more than £2.7bn ($5.36bn). A&L and Santander declined to comment.

The UK bank's shares have fallen by more than 40% in the past year.

Investors sold the shares because of worries that the bank could be facing liquidity problems in the wake of the global credit crunch.

However, A&L has denied it is facing any problems, and in November it issued a trading statement saying that it had secured extra funding facilities which would enable it to remain pre-funded until the third quarter of 2008.

Expansion

A&L had been seen a likely takeover target even before the credit crunch struck last year. Banks such as France's Credit Agricole and Australia's NAB have been seen as potential suitors.

Santander has been seeking to expand its presence in the UK market.

The bank already owns Abbey, the UK's third-largest mortgage lender, which it bought in November 2004.

Alliance & Leicester's shares closed up 106 pence, or 16.4%, at 754p.

News of the reported interest in A&L also boosted rival mortgage bank Bradford & Bingley, with its shares closing 4.0% higher.