The Spanish owner of Abbey National was yesterday said to have ruled out a bid for Alliance & Leicester as it looks to make a further raid on the UK banking sector.
Santander is ready to return to the acquisition trail less than two years after buying Abbey National and is keen on UK lenders.
A report said that Santander has looked at Alliance but is understood to have discarded the idea of making an approach.
Shares in Alliance - which has also been linked with £5.8 billion bid from France's biggest bank Credit Agricole - have soared 53 per cent since October to an all-time high of 1248p as spec-ulation over a possible take-over mounted.
But its value dipped eight per cent last week as bid rumours cooled.
Alliance chief executive Richard Pym is said to value the bank at 1500p a share or £6.7 billion.
Alliance is seen as one of the UK banking sector's most likely bid targets and Santander was thought to be a potential suitor as it looked for a bolt-on acquisition to complement Abbey, which it bought for £9.5 billion in November 2004.
A deal for Alliance would give Santander around one-fifth of Britain's new mortgage lending market and rival the dominance of Halifax owner HBOS.
It could also provide a windfall for more than half a million Alliance customers who still hold the free shares they received at the time of the group's demutualisation in 1997.
Shares in Alliance & Leicester closed up 13p at 1155p.