Banco Santander said it was to pay $2.5 billion for the 24.9 percent of Santander Mexico it does not own, showing the Spanish bank's expansion ambitions have not been dampened by a raft of buys in the past 18 months.

The euro zone's biggest bank said on Wednesday it was buying the shares from Bank of America , giving it 99.9 percent of its Mexican affiliate.

Apart from further U.S. expansion, analysts have long flagged Mexico as a country where Santander was keen to expand its presence, taking advantage of the sharp uptick in economic growth expected there over the next few years.

The Mexican government target is for the economy to grow 4.1 percent in 2010.

This is a good move for Santander, although not a surprise. Buying out Bank of America's stake in Santander Mexico was probably the only way it could significantly expand in the country, a leading Spanish bank analyst, who requested anonymity, said.

But it is now well positioned to take advantage of expected opportunities in credit growth and pension and investment funds expansion, he said.

Santander's arch rival, Spain's second largest bank BBVA , said last month it expected its Mexican unit Bancomer to post a substantial increase in profit in 2011, benefiting from an upturn in economic growth.

Santander bought British high street banks Abbey and Bradford & Bingley at the height of the credit crunch and is favorite to win the auction for branches of Royal Bank of Scotland .

At 0740 GMT, Santander shares were up 0.9 percent at 7.42 euros, in line with the blue-chip IBEX <.IBEX>.

(Reporting by Judith Macinnes; Editing by Dan Lalor)