Acquisition of Abbey National

Banco Santander Central Hispano SA
15 September 2004

Banco Santander Central Hispano, S.A.
15 September 2004

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO OR FROM THE UNITED
STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN

FOR IMMEDIATE RELEASE

 Banco Santander Central Hispano, S.A. ('Banco Santander') Statement Regarding
  Recommended Acquisition (the 'Acquisition') of Abbey National plc ('Abbey')

Banco Santander today announces further progress in its recommended acquisition
of Abbey.  The Scheme Document is expected to be posted to Abbey shareholders on
Friday, 17 September 2004 and the Abbey EGM and Court Meeting are scheduled to
be held at Wembley Conference Centre from 11.00 a.m. on Thursday, 14 October
2004.  The Acquisition is expected to complete on Friday, 12 November 2004.

Banco Santander also announces that it will hold an analyst presentation today
at which key members of Banco Santander's global management team will provide an
overview of Banco Santander and its experience in retail banking.  In addition,
Banco Santander will also update analysts on the following issues relating to
the Acquisition:

1.                  Summary expected timetable of principal events

2.                  Special arrangements for Abbey shareholders, including a
free share dealing facility, London listing and the ability to receive dividends
in sterling

3.                  Financial benefits of the Acquisition, including further
details of the cost synergies that Santander believes it can deliver and an
increase in the previously announced level of expected revenue synergies

4.                  Capital raising exercises by Banco Santander and details of
impact on Group capital ratios

5.                  Santander's future strategy regarding Abbey

6.                  Tax on dividends

Further details on the matters referred to in this announcement will be provided
in the formal Scheme Document which is being posted to Abbey shareholders later
this week.


1.                  Summary Expected Timetable of Principal Events

Event                                                                Date (2004)

Scheme Document posted                                              17 September

Court Meeting; Abbey EGM                                              14 October

Banco Santander General Shareholders 
Meeting - first/second call                                        20/21 October

Court Hearings (to sanction the Scheme and 
confirm the reduction of capital)                               8/11 November(1)

Expected date of completion of the Acquisition (Effective Date)   12 November(1)

Dealings in New Banco Santander Shares on the market of 
Bolsas de Valores expected to commence                            16 November(1)


(1) These dates are indicative only and will depend, amongst other things, on
the dates on which the Court actually sanctions the Scheme and confirms the
associated reduction of capital.

2.                  Special Arrangements for Abbey Shareholders

Banco Santander will make various arrangements for the benefit of certain Abbey
Shareholders to make it easier for them to hold New Banco Santander Shares and
to deal in them in the future, if the Acquisition is successfully completed.

First, following completion of the Acquisition, former Abbey Shareholders will
have the ability to receive Banco Santander dividends converted into sterling,
rather than in euro.  In common with all Banco Santander Shareholders, former
Abbey Shareholders will receive their dividend payments every quarter.

In addition, Banco Santander intends to seek a secondary listing for Banco
Santander's Shares on the London Stock Exchange as soon as practicable following
completion of the Acquisition. This secondary listing will provide shareholders
with a stock market quotation for Banco Santander Shares in sterling.  Banco
Santander currently expects this listing to be obtained in the first half of
2005.

Finally, Banco Santander will provide a free share dealing facility to certain
Abbey Shareholders who hold 2,000 or fewer Abbey Shares on the Effective Date
and are resident in the UK. This facility will be available from the completion
of the Acquisition until the later of 4.00pm on the date that is six months from
the Effective Date or the date on which the Banco Santander Shares are listed on
the London Stock Exchange.  Under this facility eligible former Abbey
Shareholders will be able to sell all (but not part only) of the New Banco
Santander Shares they receive under the terms of the Acquisition without
incurring any charges (including dealing charges, settlement charges and foreign
exchange commissions) and will receive the sale proceeds in sterling.  Abbey
Shareholders will be invited to request a dealing facility information pack when
they return their proxy cards for the Abbey EGM to consider the Scheme.  This
dealing facility will not be available through Abbey branches.

3.                  Financial Benefits of the Acquisition

The Banco Santander board believes that the combination of Banco Santander and
Abbey will create substantial value through both cost reduction and revenue
benefits.  Banco Santander will today present further details of the costs
savings it believes it can achieve and an increase in the previously announced
level of expected revenue benefits.

Cost savings

Abbey's management is mid-way through implementation of a restructuring plan.
Abbey has sold the vast majority of its higher risk, wholesale assets in its
Portfolio Business Unit and has lowered the risk profile of its insurance
business. However, in the view of the Banco Santander board, Abbey Personal
Financial Services' expense base remains high relative to its peers. As
previously announced on 26 July 2004, Banco Santander believes that it can
deliver, through the application of Banco Santander's skills and technology,
additional efficiency cost savings amounting to €450 million per annum, within
three years following completion of the transaction. In particular, it expects
to be able to deliver €150 million of run-rate cost savings in the first full
year, €300 million in the second year and €450 million in the third year.

To achieve its targets for cost savings in 2005 and 2006 (Short Term Tactical
Initiatives), Banco Santander has identified 28 specific cost saving initiatives
in the following key areas:

IT (€128 million) - Banco Santander believes that significant IT scale benefits
can be achieved through the application to Abbey of common management principles
and technology platforms. Banco Santander has identified ten separate IT-related
initiatives which would be implemented as part of the short term cost reduction
programme, prior to the efficiency gains expected to be realised following
implementation of Banco Santander's 'Partenon' core banking system (see below).
These initiatives will include applying IT management practices and tools
already used in Banco Santander's existing operations, and reducing or stopping
investment in projects and processes that will not be aligned with the new IT
strategy. Banco Santander also believes that the Banco Santander group as
enlarged by the acquisition of Abbey (the 'Enlarged Banco Santander Group') will
be able to secure purchasing benefits, such as more favourable contractual
terms, based on its already negotiated agreements with global IT providers and
greater economies of scale.

Customer Operations (€83 million) - Banco Santander has identified five customer
operations related initiatives which would be implemented as part of the short
term cost reduction programme. Intended cost savings in this area include
accelerating Abbey's existing plans to downsize UK sites dealing with back
office functions and revisiting the current outsourcing arrangements.

Sales (€45 million) - Since Banco Santander has practically no UK presence and
no UK branch network, the acquisition of Abbey will not give rise to branch
duplication. Banco Santander is rather seeking to protect and grow
customer-facing areas. Despite this, Banco Santander believes that it will be
able to achieve cost savings by increasing the productivity of Abbey's branches,
concentrating and eliminating administrative workload from the branch offices,
increasing efficiency in electronic distribution and increasing the productivity
of outbound call centre resources.

Other Areas (€45 million) - Based on its experience of acquiring other retail
banks elsewhere in Europe and also in Latin America, Banco Santander has
identified a number of further opportunities for cost savings, mainly in
connection with central function optimisation, business unit integration and the
realignment of business unit resources. These opportunities include a reduction
in corporate functions that will not be required once Abbey ceases to be an
independent, listed company.

The cost savings that are expected to start to materialise from 2007 onwards
will be based primarily on a thorough re-engineering of Abbey's core systems and
processes through the implementation of Banco Santander's Partenon core banking
system, and will imply significant reductions in the size of middle and back
office processing areas, improved productivity in branches and improved use of
IT infrastructure. Banco Santander estimates that €150 million of cost savings
can be derived in 2007 from this initiative. This is in addition to the €300
million of run-rate cost savings expected to arise from the Short Term Tactical
Initiatives.

Banco Santander has introduced a similar efficiency programme in Spain that has
led to and will continue to result in cost savings in these areas. Banco
Santander has also successfully transferred the skills developed during this
efficiency programme across national borders to the business in Portugal, with
local management implementing these cost savings.

The implementation of the Partenon system will provide additional cost reduction
opportunities over the medium term, including:

•       Productivity gains in the delivery of end-user applications and a
reduction in outsourcing and staffing levels;

•       Real time straight-through processing, greatly simplifying operational
tasks such as opening, maintaining and closing accounts or unsecured credit
scoring; and

•       Benefits arising from a new branch teller system expected to improve
teller productivity significantly in areas such as alerts, end-of-day closing
and controlling errors and to provide opportunities to speed up customer
transactions.

In order to achieve these synergies, Banco Santander expects to incur one-off
restructuring and investment charges of around €680 million over the three-year
period following completion of the Acquisition with approximately €315 million
set aside for the delivery of strategic cost savings, approximately €200 million
to cover the Short Term Tactical Initiatives and the remainder reflecting
contingency planning.

Although Banco Santander believes that the combination of Banco Santander and
Abbey can provide enhanced opportunities for employees generally, there will
inevitably be some headcount reduction as a result of these initiatives. In
order to implement Banco Santander's plans for Abbey and achieve the stated
run-rate cost savings of €450 million in the third year following completion of
the transaction, Banco Santander envisages a reduction in the overall number of
jobs at Abbey in the order of 3,000. Banco Santander estimates the cost
associated with 3,000 redundancies to be approximately €90 million. Banco
Santander would, however, make every effort to achieve the reduction in jobs
through natural attrition, avoiding where possible compulsory redundancies and,
hence, in practice would hope to incur lower redundancy costs. Representatives
of Abbey's recognised trade union will be consulted in relation to proposed
redundancies.

The expected cost savings have been estimated on the basis of Abbey's existing
costs, operating structures and business volumes and by reference to current
prices, exchange rates and economic conditions and the current regulatory
environment.

Revenue synergies

Following additional analysis, Banco Santander has increased its estimate of the
revenue synergies arising from the combination of Banco Santander and Abbey.
These synergies, which are described below, are now expected to produce
approximately €220 million of earnings before tax by 2007.

Banco Santander expects to generate substantial revenue synergies by
accelerating the development of Abbey's underleveraged franchise. Banco
Santander management believes that the volume of Abbey products per customer is
well below many of its UK peers and that it can generate significant incremental
revenue by:

•       Increasing its branch-based sales volumes while maintaining its existing
business volume through financial intermediaries. This initiative will
facilitate opportunities for the cross-selling of life insurance and general
insurance products in particular to customers that acquire their mortgages
through branches; and

•       Developing the consumer lending and small-to-medium enterprises ('SME')
from Abbey's portfolio of mortgage customers.

Banco Santander has designed several specific plans aimed to deliver its
targeted revenue synergies. Banco Santander believes it can introduce more
competitive products in terms of design and value for customers. Banco Santander
will endeavour to develop direct marketing campaigns that focus on specific
products related to Abbey's core mortgage lending operation. Banco Santander
intends to retrain staff to permit a switch of headcount from the back to the
front office where appropriate and to change the balance of staff remuneration
to include a higher variable element. In addition, Banco Santander intends to
introduce superior IT systems that allow faster loan decisions and more
sophisticated customer targeting, based on predictive analysis of the propensity
to buy additional products.

Banco Santander believes that the estimated contribution to profit before tax
from revenue benefits will occur in the following key areas:

Protection insurance (€29 million) and General Insurance (€45 million) - Banco
Santander believes that by increasing the volume of mortgages sold through
direct channels (particularly the branch network), it will be able to benefit
from a higher take-up rate of insurance products, particularly protection
insurance, home insurance and credit insurance, during the mortgage sale
process.

Consumer loans (€83 million) - Banco Santander has considerable experience in
providing consumer finance both through its branch network and through indirect
channels. Banco Santander will implement improved incentive systems and training
for staff coupled with more rapid credit scoring systems. Banco Santander
believes these initiatives together with Banco Santander's successful sales
culture will better position Abbey to increase the penetration of its customer
base and increase average loan balances.

Small-to-medium Enterprises (€63 million) - Abbey's market share in the SME
market is relatively low compared to the size of its branch network and existing
banking relationships. Banco Santander intends to focus on increasing sales of
SME products in the next three years by targeting principally the SME
smaller-scale segment i.e. self-employed and micro-employed and micro companies
rather than large-sized SMEs. It intends to leverage its existing mortgage and
other relationships with such customers and offer them attractive terms on SME
tailored products.

Both the revenue synergies and cost savings are based upon sterling denominated
estimates made under UK GAAP which, for the purposes of this document, have been
translated into Euros at €1.50545:£1.

The revenue synergies expected by Banco Santander have been estimated on the
basis of Abbey's 2003 revenues, operating structures and business volumes and by
reference to current prices, exchange rates and economic conditions and the
current regulatory environment.

Financial effects

Banco Santander expects that the Acquisition will be accretive to Banco
Santander's earnings per share including cost and revenue synergies and share
repurchases (before exceptional items) from 2006(2).

(2) The statements in this announcement regarding the financial benefits of the
Acquisition and as to financial accretion are not intended to mean that Banco
Santander's future earnings or earnings per share for any period will
necessarily exceed or match those of any prior year. The foregoing statements as
to expected financial accretion and revenue and cost synergies constitute
forward looking statements, which are subject to uncertainties and changes in
circumstances. Nothing in this announcement should be construed as a profit
forecast.

Banco Santander anticipates that the Banco Santander Group, when combined with
the Abbey Group on completion of the Acquisition (the 'Enlarged Banco Santander
Group'), will experience a reduction of its overall cost of capital through an
improved globally balanced business mix.

4.                  Capital Raising Exercises from Banco Santander and Impact on
Enlarged Banco Santander Group Capital Ratios

Banco Santander anticipates adjustments to its core capital of around €2.1
billion, including outstanding pension fund liabilities, balance sheet
mark-to-market, a reduction in the insurance carrying value and €555 million
derived from the impact of the special dividend of 25 pence per share payable by
Abbey upon completion of the Acquisition to its shareholders on the register of
members at the relevant dividend record time. On a combined basis for Banco
Santander's first half 2004 capital ratios, adjusted for the capital changes and
the sale of 79 million ordinary shares in The Royal Bank of Scotland Group plc
('RBS') as publicly announced on 9 September 2004, the core capital ratio would
decrease from 6.7 per cent. to 6.1 per cent..

The table below shows the impact of the transaction on the capital ratios of the
Enlarged Banco Santander Group as at 30 June 2004, after the adjustments and
impact of the special dividend of 25 pence referred to above and including the
effect of (a) the preference share issues and redemptions by Banco Santander
outlined below and (b) the sale by Banco Santander of 79 million of its holding
of ordinary shares in RBS.

Impact on Enlarged Banco Santander Group Capital Ratios(3)(4)

                                                    Banco                                        Enlarged
                           Banco       Capital  Santander                              Special      Banco
                       Santander   Adjustments   (June 04       Abbey                 Dividend  Santander
€bn                    (June 04)           (5)   adjusted)   (June 04)   Adjustments       (6)      Group
                                                           
Risk Weighted
Assets ('RWA')             217.1         0.1        217.2        86.7              -         -      303.9

Core Capital                13.8         0.7         14.5         6.5           (2.1)     (0.6)      18.4

Core Capital
(% of RWA)                   6.4           -          6.7         7.5              -         -        6.1

Tier 1 Capital              17.6         0.8         18.5         9.5           (2.1)     (0.6)      25.3

Tier 1 Capital
(% of RWA)                   8.1           -          8.5        10.9              -         -        8.3(7)

Tier 2 Capital               8.6         1.2          9.9         2.3            0.7(8)      -       12.8

Total Tier 1
and Tier 2
Capital                     26.3         2.1         28.3        11.7           (1.4)     (0.6)      38.1

Total Capital
(% of RWA)                  12.1           -         13.0        13.5              -         -       12.5(7)

(3) Figures relating to Banco Santander are prepared on the basis of Spanish
generally accepted accounting principles and relating to Abbey are prepared on
the basis of generally accepted accounting principles in the UK. Sterling
figures have been converted to euros at an exchange rate of £1 = €1.50545.

(4) Assumes that the €750 million of preference shares referred to in the
section headed 'Preference share issue' below have been issued.

(5) It is assumed that profits from the sale by Banco Santander of 79 million
ordinary shares in RBS on 9 September 2004 will qualify as core capital. It is
possible, however, that such profits will not qualify as core capital. The
effect of this on the pro forma core capital and Total Capital ratios of the
Enlarged Banco Santander Group contained in the above table would be to reduce
them from 6.1 per cent. and 12.5 per cent. to 5.9 per cent. and 12.4 per cent.,
respectively.

(6) Excludes 6 pence for dividend differential.

(7) The effect of the capital issuances referred to below on the pro forma Tier
1 and Total Capital ratios of the Enlarged Banco Santander Group will be to
increase them from 8.3 per cent. and 12.5 per cent. to 8.5 per cent. (assuming
€500 million of the preference shares referred to in the section headed 'Planned
capital raising' below are issued) and 13.1 per cent., respectively.

(8) Investments in financial institutions in excess of 10 per cent. of total
capital are deducted from total capital. The increase in Tier 2 (after
deductions) is a result of lower deductions owing to the increase in Banco
Santander's total capital following the acquisition of Abbey.

Preference share issue

On 8 September 2004, Banco Santander announced the filing of a prospectus on 7
September 2004 with the Comision Nacional del Mercado de Valores (the Spanish
securities regulator) relating to the proposed issuance of €500 million of
preference shares. The value of shares to be issued may be increased to up to
€750 million at the issuer's discretion. The issue, which will be guaranteed by
Banco Santander, will be made by Santander Finance Capital, S.A. Unipersonal,
which is a wholly owned subsidiary of Banco Santander. The preference shares
will be exclusively offered to Spanish domiciled retail investors.

Banco Santander intends to use the proceeds raised through this capital
placement for general operational purposes. The issue forms part of Banco
Santander's overall capital structure and cost management strategy, aimed at
creating a more efficient capital base.

During July 2004, Banco Santander redeemed €1,000 million of outstanding
preference shares (BSCH Finance Limited Serie O) and issued €750 million of new
preference shares (Santander Finance Capital, S.A. Unipersonal Serie III) both
qualifying as Tier 1 Capital. In addition, on 1 September 2004 Banco Santander
redeemed a further €332 million of outstanding preference shares (BSCH Finance
Limited Serie P) qualifying as Tier 1 Capital.

Planned capital raising

Banco Santander is currently planning to undertake a Tier I €500 million
preference share issue and a Lower Tier II €1 billion subordinated debt issue,
both of which are to be issued by wholly owned subsidiaries of, and guaranteed
by, Banco Santander. It is possible that the issuer will be able to increase the
value of the Tier I issue to up to €750 million. It is proposed that the Tier I
issue will be listed on one or more of the stock exchanges of Luxembourg,
Amsterdam and Frankfurt. The Lower Tier II issue is expected to be listed on the
Luxembourg Stock Exchange only. It is expected that any such listings take place
before the end of October this year. The Lower Tier II issue was launched on 9
September 2004 and has a payment date of 30 September 2004. The effect of these
capital issuances on the pro forma Tier 1 and Total Capital ratios of the
Enlarged Banco Santander Group contained in the table above will be to increase
them from 8.3 per cent. and 12.5 per cent., to 8.5 per cent. (assuming €500
million of preference shares are issued) and 13.1 per cent., respectively.

5.                  Santander's Future Strategy Regarding Abbey

Banco Santander aims to create a well-diversified international retail bank
through the combination with Abbey and aims to build on Abbey's heritage in the
UK market by retaining and supporting its brand and leveraging its franchise.

Banco Santander will bring additional products and resources to leverage Abbey's
franchise drawing on its experience and track record of achieving growth in a
variety of markets and cultures.  The scale and combined expertise of the
Enlarged Banco Santander Group is expected to position Abbey to compete
effectively by offering improved products and services to its customers.  The
Banco Santander board also believes that the Acquisition will create benefits
for Abbey's customers and will create value for both Banco Santander and Abbey
shareholders through improvements in Abbey's customer offering and
implementation of the technology-based efficiency programmes referred to above.

Banco Santander believes that any flowback associated with the transaction will
be manageable and that any forced selling by institutional shareholders will be
mitigated by technical demand from European and international index trackers,
short-covering by hedge funds and additional demand from long term value
investors.  Banco Santander expects that, following completion of the
Acquisition, former Abbey Shareholders will own a significant proportion of the
enlarged issued share capital of Banco Santander and will benefit from the
continued turnaround of Abbey's business as well as the realisation of expected
synergies.

6.                  Tax on Dividends

The tax treatment of dividends from UK and overseas companies is different and
there are likely to be some tax implications for Abbey shareholders receiving
dividends on their New Banco Santander Shares going forward.  Abbey and Banco
Santander are investigating possible ways of mitigating the impact of Spanish
withholding tax on dividends from a Spanish company and the different UK tax
treatment which applies to the receipt of a dividend from a UK company and a
dividend from a Spanish company.

In evaluating the overall attractiveness of holding the New Banco Santander
Shares, Abbey shareholders should consider Banco Santander's track record in
terms of dividend growth and total shareholder returns.  Between 1994 and 2003,
the compound annual dividend growth in euro and Spanish pesetas for a Banco
Santander Share was more than 10 per cent. per annum.  This dividend growth
combined with the share price appreciation over the same period means that Banco
Santander Shareholders who bought shares at the end of 1994 and held them until
the end of 2003, received an accumulated return of 377 per cent.. (9)

(9) The foregoing statements as to historical performance are not intended to
mean that Banco Santander's future performance will necessarily exceed or match
any prior year.

Further details on the matters referred to in this announcement will be provided
in the formal Scheme Document which is being posted to Abbey Shareholders later
this week.

Today's analyst presentation will be held at Goldman Sachs International,
Rivercourt Building, 120 Fleet Street, London EC4A 2BB at 9.30 a.m.  The
presentation will be broadcast via a live webcast available at http://
www.gruposantander.com and there will be a dial-in conference call facility on +
44 (0) 207 098 0704.

Enquiries:

Banco Santander
Keith Grant (Head of International Media)                      + 34 91 289 5206
Peter Greiff                                                   + 34 91 289 5207

Maitland
Angus Maitland                                                 + 44 20 7379 5151
Martin Leeburn
Philip Gawith

Brunswick
Rurik Ingram                                                   + 44 20 7404 5959


Terms defined in the press announcement dated 26 July 2004 have the same meaning
as in this announcement.

Goldman Sachs International ('Goldman Sachs'), which is regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for Banco
Santander as joint financial adviser and no one else in connection with the
Acquisition and will not be responsible to anyone other than Banco Santander for
providing the protections afforded to clients of Goldman Sachs nor for providing
advice in relation to the Acquisition, or any matter referred to herein.

J.P. Morgan plc ('JPMorgan'), which is regulated in the United Kingdom by the
Financial Services Authority, is acting exclusively for Banco Santander as joint
financial adviser and no one else in connection with the Acquisition and will
not be responsible to anyone other than Banco Santander for providing the
protections afforded to clients of JPMorgan nor for providing advice in relation
to the Acquisition, or any matter referred to herein.

Merrill Lynch International ('Merrill Lynch'), which is regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for Banco
Santander as joint financial adviser and no one else in connection with the
Acquisition and will not be responsible to anyone other than Banco Santander for
providing the protections afforded to clients of Merrill Lynch nor for providing
advice in relation to the Acquisition, or any matter referred to herein.




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