Santander May Cut 4,500 Abbey Jobs

Emilio Botin, head of Banco Santander Central Hispano, is today expected to tell union officials that the Spanish bank's £8bn takeover of Abbey National might cause up to 4,500 job losses over three years.

Mr Botin, however, is expected to try to reassure unions that this is an absolute ceiling on redundancies and is likely to compare such cuts with the 9,000 losses which are feared if HBOS launches a successful counter-bid for the British mortgage bank.

The City expects HBOS to be able to achieve major cost savings if it does decide to bid. Calculations show that 70% of Abbey and Halifax branches are within 400 metres of one another.

Santander does not have a branch network in Britain and is seeking efficiencies through IT systems. It is understood to believe that job cuts would be less than half those feared under an HBOS takeover.

Such information is likely to be analysed by the competition authorities should HBOS decide to bid for its closest rival. Halifax is the country's number one mortgage lender while Abbey is the second largest.

HBOS has insisted it will try to launch a "stakeholder friendly" offer and may produce statistics showing the combined Halifax and Bank of Scotland employs more people - not less - than they did separately.

Three weeks ago HBOS ignited bid speculation by admitting it was considering an offer to counter the Santander bid, which is unpopular with Abbey investors as it requires them to swap each of their shares for one in the Spanish bank. Abbey is also giving its investors 31p in cash as part of the deal.

HBOS has yet to decide formally whether to enter the bidding. City sources pointed out that the group faces a postage bill of more than £30m if it does do so as it is likely to have to win the support of 4.3m private investors.

HBOS is expected to need to use its own shares to pay for any bid which would require the approval of its own shareholders for the offer under British regulations. This means that HBOS would need to send hefty offer documents to its 2.5m private investors as well as the 1.8m individuals on Abbey's shareholder register, potentially posing a challenge to the postal system. Both banks have large numbers of private investors because of their legacies as building societies, which meant they gave away free shares when they converted to banks.

A bid by HBOS is regarded as having the risk of a referral to the competition commission. Any referral may last six months or so and Santander could walk away, provided it pays an £81m break fee to Abbey.

An HBOS bid might also entice other domestic bidders into the arena, particularly Lloyds TSB which was blocked in its attempt to take over Abbey three years ago by the competition authorities.