A deal between Alliance & Leicester and Spain's Banco Santander will thrust the group into second place in the UK mortgage market, but the Abbey-owner revealed that this is not a position it intends to hold on to for long.

Rather than planning an assault on Britain's mortgage market, Spain's largest bank said it was instead aiming to whittle down the combined group's assets by up to £30 billion over the next two years.

It will start life with an immediate share of some 13% of UK mortgages, overtaking Nationwide and threatening Halifax's pole position. However, Santander today made clear in explaining the rationale behind its takeover plans that mortgages are far from the key motivator as the UK housing market declines at breakneck speed.

Alliance & Leicester has long been in the sights of Spain's Banco Santander as it has sought to steal a greater stake of UK banking, with speculation of a bid from the Abbey owner having been a regular market whisper since even before the credit crunch hit.

The Spanish group, which bought the then Abbey National for £9.5 billion in November 2004, has reportedly made advances for A&L a number of times since early 2006, with A&L's strong mortgage book then seen as the top attraction.

The rumoured offer price stood at more than 1400p in 2006 against today's offer of 299p a share, but was rejected by a bullish A&L as its share price was rising steadily towards all time highs.

Reports of further discussions in December of this year put the price tag at a greatly reduced £2.7 billion, while today's £1.26 billion approach - less than a quarter of the reported original price of some £5.9 billion - underlines the turmoil that has faced A&L since the credit crisis pulled the rug from under its feet.

A tie-up with A&L has always been seen as a no-brainer for Santander, say analysts, although it had been assumed that mortgages were its main focus.

The group has made no secret of the fact it wanted to increase its share of the UK banking market and an acquisition is a fast and effective way to do this - particularly at a time when bargains are to be had in the embattled sector. A&L's shares have fallen by more than 80% since the highs of over 1200p last May, proving "too tempting an opportunity for Santander, a highly acquisitive company", said Andy Penman, equity analyst at Barclays Wealth.

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