UK set to nationalize B&B bank, may sell savings

By Steve Slater and Sumeet Desai

LONDON (Reuters) - Britain's government will nationalize troubled mortgage lender Bradford & Bingley BB.L and is discussing the sale of its savings book and branches, people familiar with the matter said.

The BBC reported on Sunday that Bradford & Bingley's savings business will be transferred to Spanish banking giant Santander (SAN.MC: Quote). A Santander spokesman could not confirm the report.

The Treasury is leading talks on the rescue of the bank and on Sunday said discussions were continuing. Full details of the plan were not expected to be announced on Sunday, but would be made by finance minister Alistair Darling before Monday's market opening, a person familiar with the talks said.

The Treasury would nationalize all of B&B under emergency legislation it introduced when it took control of Northern Rock in February.

The bank's 24 billion pound ($44 billion) deposit book and its 200 branches would then be immediately sold to a commercial bank if the government could strike a deal, the source said.

Santander, which owns Abbey and is in the process of buying Alliance & Leicester ALLL.L, was in talks about possibly taking over deposits and branches, industry sources said.

The government would have preferred a private-sector rescue for Britain's ninth-biggest mortgage provider, but rivals appeared unwilling to come in as a "white knight" amid a global credit crisis and weakening British housing market.

The government this month brokered the takeover of HBOS HBOS.L, Britain's biggest home lender, by rival Lloyds TSB (LLOY.L: Quote) and is stepping in again.