UK mortgage lender in takeover talks

Santander declined to comment on the report. Alliance & Leicester did not immediately return a call seeking clarification.

The lender is one of several British banks which have been badly bruised by tightening credit market following the collapse of the U.S. subprime mortgage market. Banks' unwillingness to part with loans as house prices fall have cut into revenue and depressed share prices.

Shares of Alliance & Leicester fell steeply in February after it cut its forecast for full-year 2008 earnings.

The company said Monday it was considering a possible offer at a price of 299 pence ($5.95) per share, which would value it at about 1.25 billion pounds ($2.5 billion), it said in a statement. Shares surged more than 45 percent in morning trading to 319.5 pence ($6.36) per share. Other banking stocks also rose.

Santander--the largest bank in the euro zone by market capitalization--is racking up revenue thanks in part to booming business in Latin America.

The Spanish bank is also hunting for acquisitions abroad. Earlier this year it purchased 20 percent of Philadelphia-based Sovereign Bancorp Inc. It made its 8 billion pound deal for Abbey National in 2004.

Alliance & Leicester said its announcement was made without the consent of the potential buyer, adding that there was no guarantee that an offer would be forthcoming.