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Santander gets in on floor with A&L deal

Santander’s £1.2bn takeover of Alliance & Leicester has been welcomed as positive news for the bealeaguered mortgage industry.

Association of Mortgage Intermediaries director general Chris Cummings says it will help stabilise the sector, although it raises questions over consumer choice in terms of consolidation.

He says: “It is good that a global player such as Santander is willing to invest more capital in the UK at this time. It should provide much needed stability for the marketplace and a reassurance about the strength of the mortgage industry.”

Stephen Knight, executive chairman at Checkmate Mortgages, says the Spanish banking giant’s decision to buy A&L for 299p per share or 317p including dividend means it thinks it is getting a price near the market floor. Last Friday, the A&L share price was at 219p but leapt to trading at around 314p on Tuesday this week.

“It is a good sign when the big boys come in. Entrepreneurs seize opportunities in the difficult market conditions and that is what Santander is doing. They obviously think the floor is in sight,” he says.

Santander says it will need to provide additional capital of £1bn to A&L which will be allocated to balance sheet strengthening and integration costs.

To address potential liquidity risks, the firm intends to reduce the assets of the combined A&L and Abbey by between £20bn and £30bn over the course of two years.

Bank of Ireland head of marketing Mehrdad Yousefi, formerly head of intermediary mortgages at Alliance & Leicester, says the deal could be seen as opportunistic for Santander. “I think an A&L shareholder would have to question whether it is a good deal for them in the long term,” he says.

Yousefi believes the deal will be approved by the Competition Commission. “It would take their mortgage market share to between 12 to 15 per cent. I would expect this to go through,” he says.

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