High street lending giant Santander is considering a £2 billion takeover of Clydesdale and Yorkshire banks, it has been reported.
The Spanish owned group has been eyeing the lenders as it seeks to get expansion plans back on track following the collapse of its deal to buy 316 branches from Royal Bank of Scotland, according to The Sunday Times.
Clydesdale and Yorkshire parent National Australia Bank has been under pressure to sell or spin-off the loss-making divisions.
Figures released in October showed that Clydesdale and Yorkshire slumped to a pre-tax loss of £183 million in the year to September 2012 after they were hit by a sharp increase in bad debts.
But they have a strong presence in business banking in the north west and Scotland which would provide a boost to Santander and its burgeoning small business lending division.
Santander, which was not available for comment, has already grown to become the UK's fifth largest lender through a series of acquisitions, including the former Abbey and Alliance & Leicester building societies.
Plans to further bolster its position fell through last October when it pulled the plug on its branch deal with RBS, saying the deal could not be completed by the agreed deadline.
Santander UK is expected to launch its long-awaited stock market listing this year, which could value the business at around £10 billion.
It would come after a more difficult time for the group, however, following plunging profits and ahead of UK plans to overhaul the sector by ring-fencing retail and investment banking operations.
Santander UK revealed profits slumped by 27% to £372 million in the three months to September 30 as it said funding and regulatory costs impacted margins.