Europe's biggest bank Santander has confirmed that it hopes to merge high street lender Alliance & Leicester (A&L) with Abbey.

Santander bought Abbey in 2004 and has bid almost £1.3 billion for A&L, although another offer may still emerge from one of the banking giant's rivals.

If the Santander deal is successful, then the company will control about 1,000 branches in Britain and enjoy an eight per cent share of the UK's personal loans and savings market.

According to the Liverpool Daily Post, Santander said it is keen to hold on to A&L's Bootle-based commercial banking arm, which is good news for the 2,000 Merseyside employees.

Yesterday, the Association of Mortgage Intermediaries welcomed the fact that Santander is prepared to invest more capital in the UK at a time when the economy is slowing down and said the merger should provide some "much-needed stability".