SPANISH banking giant Santander yesterday said it had injected £1bn into its UK subsidiary Abbey National, and later in the day confirmed it was in advanced talks to acquire US-based Sovereign Bancorp.

SPANISH banking giant Santander yesterday said it had injected £1bn into its UK subsidiary Abbey National, and later in the day confirmed it was in advanced talks to acquire US-based Sovereign Bancorp.

The Bilbao-based group said the £1bn injection, which is part of its agreement to support the UK government's bank bail-out scheme, was in line with the commitment it made at the time of the acquisition of Alliance & Leicester.

Santander said the move would also improve the capital ratio of its businesses in the UK. Santander acquired Abbey in 2004 and it bought Alliance & Leicester earlier this year.

The eurozone's largest bank said: "Santander does not intend to use the UK government's recapitalisation initiative with government funds, but strongly supports efforts to stabilise the operation of financial markets as shown by providing around £1bn of funding, at maturities between three and six months, to other UK banks last week."

Meanwhile, Santander also confirmed it was in talks over the possible buy-out of Philadelphia-based Sovereign, as it hunts for further bargains in a sector pummelled by a global financial crisis.

Santander already owns a 25% stake in Sovereign, and speculation has mounted that the Spanish bank would seek to protect its investment by orchestrating a takeover of the US company.