Takeover talks continued between Banco Santander, the biggest bank in the euro-zone, and US-based Sovereign Bancorp. The Spanish giant already owns twenty five per cent of the Philadelphia-based Sovereign and now looks set to buy it outright.

According to the Wall Street Journal, which cites banking officials familiar with the deal, Santander is expected to pay $3.81 for each Sovereign share - the latter’s New York Stock Exchange closing price last Friday - which it does not already own, a deal which values the lender at $2.53 billion.

Santander’s interest in Sovereign began at the end of 2005, with the acquisition of one fifth of the institution.  By the end of 2007, it has purchased 24.43 per cent of the
US bank, according to

Santander's annual report. The bank reportedly wants to buy more in order to protect its investment.

The talks began on Sunday as

Santander announced a cash injection of £1 billion ($1.72 billion) for UK lender Abbey National, in an effort to strengthen the bank’s capital ratios.

In July, it reached agreement to buy
UK's Alliance and
Leicester in a deal worth $2.17 billion. And in September,
Santander purchased the best assets of

UK lender Bradford and Bingley for £612 million ($1.1 billion).

Before the impact of this capital injection,
Santander estimates that the combined

UK subsidiaries, Abbey and Alliance & Leicester, would have had a Tier 1 ratio of about 8 per cent at the end of 2008. The capital injection will improve the capital ratios by 1.25 per cent.

Santander does not intend to use the

UK government's recapitalisation initiative.

Santander is one of the few European banks to strengthen its global position amid seismic shifts in the market, proof positive of the wisdom of the prudent lending policies and the strict regulation that Spanish politicians boast makes their economy the envy of the world.

Banco Santander also hopes to more than triple the size of its wealth management business in

Italy within three years, as WealthBriefing reported in September.

Sovereign Bancorp is the parent company of Sovereign Bank, which has a major presence in the

US northeast. The bank has 750 branches and about 12,000 employees.