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13 September 2010 By Fiona Maharg-Bravo

The Spanish lender has spent 8 bln euros on deals recently, the latest being the purchase of a Polish retail bank. Santander could still attain a core Tier 1 ratio of 8 pct by 2011. But if it wants a bigger cushion, it may have to raise capital say by an IPO of its UK arm.

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Banco Santander, Spain's largest bank, has agreed to buy Allied Irish Banks' 70.4 percent stake in Poland's Bank Zachodni WBK for 2.94 billion euros.

The Spanish lender saw off competing offers from France's BNP Paribas and PKO, Poland's largest bank.

Santander said it would make an offer to all Bank Zachodni's shareholders, in which AIB will tender its shares. The group will also buy the Irish lender's stake in BZ WBK Asset Management for an additional 150 million euros in cash.

The deal would contribute to earnings per share within a year of completion and generate an annual return on investment of 11 percent by the third year, Santander said. However, it would reduce Santander's core capital, which stood at 8.6 percent in June, by about 40 basis points.

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