Madrid  - Spain's Santander bank said Monday it had made a deal to buy 100 per cent of the British bank Alliance and Leicester for 1.57 billion euros (2.5 billion dollars).

The transaction will be carried out through a share swap, with Santander exchanging one of its shares for every three shares of Alliance and Leicester, Santander told the Spanish market regulator CNMV.

Santander will extend its capital by 2 per cent for the operation.

Alliance and Leicester will be integrated into Santander's British subsidiary Abbey, which the Spanish bank acquired in 2004.

The operation was expected to be completed in October after getting the green light from shareholders.

Santander president Emilio Botin described the deal as a "significant step" towards expanding his bank's activities in Britain. (dpa)