SPAIN'S biggest bank is poised to snap up Abbey National in a deal that would create the world's tenth largest banking company.

Abbey's directors have supported a bid from Banco Santander Central Hispano (BSCH) that values the British bank at £8.3bn.

Abbey believes the deal will speed up its turnaround strategy launched 17 months ago, while the BSCH board described the acquisition deal as an excellent entry into the UK market. BSCH's offer would give 1.7 million private shareholders, many of whom were given windfall shares at the time of the former building society's flotation in 1989, one share in the enlarged company for every Abbey share owned.

There will also be a one-off dividend payment worth 31p a share.

Based on Santander's share price ahead of Friday's confirmation of talks, the deal is worth £8.5bn, although this reduces to £8.3bn following a fall in the company's market value.

BSCH hopes to complete the acquisition by the end of the year, but must first win the approval of shareholders and hope no other bidders emerge.

Abbey, which is the UK's second biggest provider of mortgages and savings, has attracted interest from National Australia Bank and the Bank of Ireland in the past, while Lloyds TSB was blocked by competition authorities from completing an £18bn takeover in 2001.

Since then, Abbey has reported two years of heavy losses, although figures announced yesterday showed a return to the black at the half-year stage.

That was achieved after new chief executive Luqman Arnold sold non-core businesses, including those involved in risky corporate loans, and focused the company back on high street operations.

He said: "We believe Santander will be able to dramatically accelerate our turnaround.

"With their resources and know-how, this will happen faster and become more efficient.

"That is a huge benefit to shareholders, customers and staff."

BSCH is valued at £30bn and has a strong presence in Europe and Latin America, employing more than 100,000 people.

It expects the combination to provide cost savings and revenues benefits worth 560m euros (£370.1m) within three years of the deal being completed.

The potential for improvement at Abbey was highlighted in half-year results, which showed profits of £350m against a loss of £144m last time.