Banking giant Banco Santander yesterday announced it will absorb its Spanish offshoots Banesto and Banif, closing 700 branches and saving an estimated €520 million a year.

(The Banif organisation in Spain has no connection with the Portuguese financial Group Banif, SA  or Banif Bank (Malta) plc.)

The restructuring would save about 10 per cent in costs, or €420 million in the third year

Santander, the biggest bank in the eurozone by market value, said the offshoots would be absorbed into the Santander brand, which would boast 4,000 branches under the same name in Spain.

Santander, which already owns 89.74 per cent of Banesto, said it would pay the offshoot’s minority shareholders with Santander stock, offering a premium of 25 per cent.

“This is a good transaction for everyone,” chairman Emilio Botin said in a statement, noting the premium to be paid to Banesto minority shareholders, the global network available to customers and the international opportunities opened up to staff.

“This transaction is part of the restructuring of the Spanish financial system, which involves a significant reduction in the number of competitors and the creation of larger financial institutions,” the bank said.

Spain’s eurozone partners agreed in June to provide up to €100 billion to rescue the crippled banking system, overloaded with bad loans extended during a housing bubble that popped in 2008.

Santander said its merger with Banesto and with its fully owned Banif unit would lead to the closure of about 700 of the three banks’ 4,664 branches.

But the group said it would lower job numbers gradually without “abrupt cuts”.

The restructuring would save about 10 per cent in costs,or €420 million in the third year, it said.

Revenues were expected to rise by €100 million in the same time frame.

The lower costs and higher revenues would mean pre-tax “synergies” of €520 million from the third year, it said.