Santander, the Spanish owner of Abbey and Alliance & Leicester, looks set to miss its ambitious €10 billion (£9 billion) profit target for 2008 after sustaining hits from Bernard Madoff’s alleged $50 billion swindle and the collapse of Lehman Brothers.

Speculation about the humbling of Spain’s biggest bank intensified as more details emerged about Mr Madoff’s frantic attempts to prevent the collapse of his elaborate Ponzi scheme, and US prosecutors increased their efforts to jail the shamed fund manager.

Santander, which had emerged relatively unscathed from the credit crunch, announced in June that it was aiming for a net profit of €10 billion for 2008.

Banking sources in Spain said yesterday, however, that Santander was likely to miss the target as its private bank compensated wealthy clients that lost millions of euros on Lehman bonds after the investment bank collapsed last September.

There is also a possibility that Santander will be forced to compensate customers who lost money in the Madoff scandal after investing in the bank’s Optimal strategic US equity fund.

The Switzerland-based fund lost about €2.33 billion of its clients’ cash after putting it into Mr Madoff’s investment fund. Santander itself lost only €17 million invested with Mr Madoff.

The fund manager was arrested on December 11 after allegedly confessing to his sons Mark and Andrew that he had been running what was effectively a giant Ponzi scheme in which he used funds invested by new clients to pay fake returns to existing investors. The scam unravelled after clients became nervous because of the financial downturn and asked for $7 billion of their cash back.

Yesterday it emerged that Mr Madoff had made desperate attempts to prop up the scheme by taking $250 million from Carl Shapiro, one of his long-time supporters, in the weeks before his arrest.

It is not clear whether Mr Shapiro, a 95-year-old entrepreneur and philanthropist, saw the cash as an investment or a loan but sources said that he was assured that the money would be returned quickly.

Mr Shapiro had first invested with the 70-year-old in 1960, when he entrusted the then-fledgling fund manager with thousands of dollars to invest on his behalf. He was one of Mr Madoff's oldest friends and the two frequently lunched together. Mr Shapiro has personally lost an estimated $400 million in the fraud, including the $250 million, and his charitable foundation a further $100 million.

US Government prosecutors yesterday stepped up their efforts to have Mr Madoff, who is under 24-hour house arrest at his Manhattan penthouse, jailed after he alleged broke the terms of his bail.

Marc Litt, assistant US attorney, told a Manhattan court on Monday that Mr Madoff had posted valuables over the Christmas and New Year period to his sons, brother Peter and another unnamed couple.

The fund manager had previously been ordered by the court not to move any of his assets, while investors who lost money in his alleged scam try to recover their cash.

Ira Sorkin, Mr Madoff's attorney, told the court on Monday that the items were family heirlooms that had been sent in innocence. But Mr Litt claimed in written testimony yesterday that one parcel posted by Mr Madoff contained 13 watches, a diamond necklace, an emerald ring, and two sets of cufflinks. The prosecutor said that the collective value of this parcel could exceed $1 million.

"Two other packages containing a diamond bracelet, a gold watch, a diamond Cartier watch, a diamond Tiffany watch, four diamond brooches, a jade necklace, and other assorted jewelry, also were sent to relatives," Mr Litt wrote in his evidence.

Judge Ronald Ellis must decide whether Mr Madoff's activities warrants the revocation of his $10 million bail.

Some investors who lost money with Mr Madoff could be compensated within a few months, according to Stephen Harbeck, president of the Washington-based Securities Investor Protection Corp (SIPC). But he also warned that others would have to wait considerably longer if the missing Madoff cash proves hard to trace.

SIPC, which is funded by its membership of broker-dealers, has a mandate to return up to $500,000 each to individual investors who held accounts with Mr Madoff's securities firm during the past 12 months.

Irving Picard, the trustee appointed to unwind Mr Madoff's company and locate the missing funds, sent out 8,000 claim forms in partnership with SIPC last week. Mr Picard has uncovered about $830 million in cash in the company so far and about $850 million in liquid assets.

The SIPC has just $1.6 billion with which to compensate investors but can ask Congress for additional funds to meet payment demands.

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