Reuters
Mon 23 August, 2004

By Elizabeth O'Leary and Carmel Crimmins

MADRID/LONDON (Reuters) - Spain's SCH plans to cut around 3,000 jobs at takeover target Abbey National to meet its goal of reducing costs by 450 million euros (302 million pounds) at the bank within three years.

At a meeting between Santander Central Hispano Chairman Emilio Botin and Abbey's staff union, SCH said it would safeguard staff pensions and offer 100 SCH shares (currently worth about 800 euros) to each Abbey employee if the takeover were successful, according to an SCH statement on Monday.

There would also be a staff share scheme designed to be as tax efficient as possible for Abbey's 26,000 employees.

Last month, SCH made an 8-billion-pound-plus takeover offer for Britain's second-biggest mortgage lender.

UNION

Abbey's union said it would work to try to achieve the 3,000 job cuts through voluntary agreements and so-called "natural wastage" whereby people are not replaced when they leave.

"We need to understand from SCH, who have committed to working with us in an open way, where these job cuts are going to come from," said a union spokeswoman.

Abbey employs around 5,500 in back-office administration and call centres. The bank has approximately 10,000 people working in its branch network and 3,000 employed in head office.

"These 3,000 job cuts do not sound like a high number. It sounds to me like SCH are leaving the branch network intact," said one analyst who declined to be named.

SCH's savings target mainly stems from revamping computer systems. Abbey employs around 1,500 people in its IT operations.

Analysts estimate a large UK bank could more than double SCH's targeted cost savings and the number of job cuts because of the overlap of branches and administration centres.

Last week, Santander described speculation that it would lay off 8,000 employees at Abbey to meet its profit goals as "clearly exaggerated". Analysts at Citigroup mentioned this figure in a report this month.

The Sunday Telegraph reported at the weekend that Santander would drop its offer for Abbey if rival bids result in a drawn-out competition investigation, as it feared a lengthy probe would create uncertainty and damage Abbey's business.

Earlier this month, a source familiar with the situation told Reuters Santander could decide to let its bid lapse in the event of a six-month competition probe -- giving Abbey shareholders a stark choice between a certain takeover by Santander and a possible higher bid from a British rival.

Santander's deal will lapse if it is not completed by March 31. SCH's bid for Abbey needs 75 percent shareholder backing at Abbey's October extraordinary general meeting.

Britain's largest mortgage lender HBOS said earlier this month it was considering a challenge to SCH's bid, but is not expected to make an approach to Abbey before September.

In Madrid, Santander's shares were up 1.79 percent at 7.96 euros. In London, Abbey was up 0.9 percent at 589-3/4 pence. At current prices, Santander's bid values each Abbey share at 567p. The higher actual price for Abbey reflects counterbid hopes.

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