Banco Santander has signed an agreement to acquire the Royal Bank of Scotland Group's (RBS) banking business that carried out through its branches in England and Wales and its NatWest network in Scotland, for approximately GBP1.65bn.

The acquisition includes 311 RBS branches in England and Wales, seven NatWest branches in Scotland, with 40 SME banking centers, four corporate banking centers and three private banking centers, 1.8 million retail customers, 244,000 SME and 1,200 mid-corporate customers.

Following the transaction, the Santander market share in this segment is expected to grow from 3% to over 8%, bringing it closer to the retail banking business, where Santander UK has a market share of around 10%. Santander claimed that its UK market is contributing 17% to the group’s net attributable profit in the first half of 2010.

The transfer of RBS’ and NatWest’s business to Santander UK will amount to approximately GBP21.5bn of assets and GBP22.4bn of deposits, involving two million customers and around 5,000 employees.

Emilio Botin, chairman of Banco Santander, said: “This acquisition is a giant step for Banco Santander in the small and medium-sized enterprises sector in the UK.”

Antonio Horta-Osorio, CEO of Santander UK, said: “The RBS and NatWest branch acquisition will accelerate our growth and improve competition in a sector vital to the UK economy.”

However, the transaction is expected to be completed in 15 to 18 months once the necessary approvals are obtained.