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As Santander speculation persists, M&T stock soars<br> Climb of 8.6% reflects U.S. merger prospect

Continuing speculation about a merger between Banco Santander SA, Spain's biggest bank, and M&T Bank Corp. sent the Buffalo bank's stock soaring Thursday.

Matias Inciarte, a Banco Santander vice chairman, said at a seminar in Spain on Thursday that his bank had made no decision about any combination with M&T.

That comment sent M&T's stock up by as much as 11 percent during the day Thursday, to $90.99, before closing at $89, up by 8.6 percent, or $7.07 a share. Similarly, trading in M&T options to buy the stock surged tremendously.

Santander held talks with M&T about combining its U.S. business, Sovereign Bancorp, with the Buffalo-based lender, as reported last month. But negotiations, which had reportedly reached "advanced stages" after weeks of talks, stalled because of disagreements over who should be in control and concerns about shareholder value.

M&T has declined to comment, citing its long-standing policy not to comment on such speculation. But a source familiar with the situation had confirmed that M&T, while interested in buying Sovereign, was not interested in ceding control of the bank to any partner.

At stake is Santander's 722-branch Sovereign unit, based in Philadelphia, with assets of $72 billion. M&T has $69 billion of assets and 750 offices. But Sovereign has been weakened by problem loans, while M&T has emerged from the financial crisis almost unscathed and with its reputation enhanced.

A merger would double M&T's size and create a regional giant stretching from New Hampshire to Virginia.

Fueling the talks is the plan by M&T's largest shareholder, Allied Irish Banks PLC, to sell its 22.5 percent holding in the bank to boost its capital base. That stake could have been acquired by Santander in one fell swoop, eliminating concerns about how to unload such a hefty block of stock without disrupting M&T.

M&T, a pillar in the Buffalo business community, employs more than 5,000 in Western New York and is also a major force in civic affairs through its philanthropic and volunteer contributions.

Santander, based in the northern Spanish port of the same name, is an aggressive bank that seeks a 15 percent market share in Sovereign's footprint areas, Chief Executive Officer Alfredo Saenz said in April.

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