Leading article: A new force in British banking?

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The Independent Online

In 2008 a Spanish armada succeeded where the first failed. At the height of the financial crisis, the Spanish banking giant Santander, which already owned Abbey, was strong enough to sail into British waters and snap up the stricken Alliance & Leicester and Bradford & Bingley. These opportunistic acquisitions doubled Santander's UK branch network.

That boldness appears to be paying off. Last week, Santander reported that it accounted for 50 per cent of all new mortgages in Britain in 2009, and its UK profits were up 30 per cent to £1.5bn. For these reasons, the Spanish bank is regarded as one of the few big names in European finance to have done well out of the turmoil of the past two years.

Now the Spanish fleet appears to be preparing for new manoeuvres. Santander is considering floating a stake in its British operation on the UK stock market. Large institutional investors have been sounded out and promised fat dividends if they put up the cash. This is believed to be part of a plan by Santander to buy the network of 300 branches which is being sold by the Royal Bank of Scotland, under pressure from the office of the European Union competition commissioner.

So how should ordinary bank customers feel about this new Spanish expansion? The problem with the UK banking sector is a combination of under-capitalisation and over-concentration. The "big four" – Barclays, Lloyds, HSBC and RBS – have become too dominant in recent years. They are also drawing in their lending to businesses and homeowners as they seek to repair their ravaged balance sheets. So a fifth banking force on the high street – especially one prepared to lend to sound businesses in need of working capital – would be a welcome development. If Santander can become that force, so much the better for British banking customers.

But there is room for caution. Another explanation doing the rounds for Santander's proposed float is that it needs to raise funds to cover losses in its home market of Spain. If this is about Santander sailing back to protect its base, rather than expanding in Britain, the new competition that UK banking customers sorely need might need to come from elsewhere.