Shares in British mortgage bank Alliance & Leicester jumped over 15 percent on Wednesday after news that it had held tentative takeover talks with Spain's Santander last month.
A&L, one of the worst performing U.K. bank stocks last year, was up 15.4 percent, valuing the mortgage lender at just over 3.1 billion pounds ($6.15 billion) -- above recent lows but still almost half its 2007 peak of 5.9 billion pounds.
Santander shares were trading down 1 percent.
A source familiar with the matter, confirming news reports, said on Wednesday the two banks had held talks but negotiations faltered in mid-December when they failed to agree a price.
The Financial Times, however, quoted people close to the Spanish bank as saying Santander had not ruled out resuming negotiations or making an improved offer.
In an interview with the FT on Monday, Santander Chairman Emilio Botin said the Eurozone's largest bank, which already owns U.K. high street bank Abbey, wanted to grow in Britain and the United States and was looking for buying opportunities.
Santander has in the past expressed an interest in UK corporate rather than mortgage lending, but analysts said the deal could prove too good to miss.