Banco Santander said yesterday it was interested in making a full bid for Deutsche Postbank, Germany’s largest retail bank with more than 14 million customers, as it made a last-ditch attempt to stymie a rival proposal from Deutsche Bank.

The Spanish bank, which owns Abbey in the UK and is in the process of acquiring Alliance & Leicester, made the announcement amid growing speculation that Deutsche Bank was the preferred bidder.

Santander revealed its interest in buying Postbank only after the Spanish banking regulator asked it to respond to German media reports, a source close to the deal said yesterday.

Deutsche is thought to be offering to buy just under 30 per cent of Postbank with options to acquire the rest of the 50 per cent stake held by Deutsche Post, the German post office.

A successful deal for Deutsche Bank would allow it to reclaim the title of Germany’s dominant retail bank just days after its crown was threatened by Commerzbank’s planned takeover of Dresdner Bank.

Postbank has 850 standalone branches as well as distribution through Deutsche Post offices.

The Deutsche Post board is believed to favour an all-German deal. It would also have the blessing of Peer Steinbrück, the German Finance Minister, who said a link-up between Deutsche Bank and Postbank would be a welcome push forward in consolidating the fragmented banking sector.

An announcement could come as early as today, when the Deutsche Post supervisory board is due to meet. A deal would be the second big bank marriage in Germany this month after Commerzbank agreed to buy Dresdner Bank for €10 billion (£7.9 billion). The Commerzbank/Dresdner combination, announced last week, will have about 1,200 branches in Germany. Deutsche Bank as it now stands has 986.

Santander said that it had expressed an interest in making an indicative full bid for Postbank, adding that the offer was subject to due diligence.

Deutsche Post revealed that it might sell Postbank late last year as one of two strategic priorities, along with turning around its loss-making DHL Express business in the United States.

Deutsche’s plans to expand its domestic retail franchise in the face of difficult conditions in investment banking, were thwarted in July when it was outbid for Citigroup’s small loans business in Germany by Crédit Mutuel of France, paying €4.9 billion.

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