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Shares in Alliance & Leicester rose today on the back of rumours of takeover talks with Abbey owner Banco Santander.

A possible takeover of Alliance & Leicester by the owner of Abbey has seen the mortgage lender's share price to rise this morning.

In early trading the bank's share price rose nearly nine per cent to 702p. However, Alliance & Leicester's share price fell 43 per cent over 2007, making it an increasingly-attractive proposition for bidders.

It was reported Spanish bank Banco Santander held talks with Alliance & Leicester about a takeover, but discussions faltered over the price offered.

However, a further offer from Santander has not been ruled out.

Alliance & Leicester meanwhile is refusing to comment on the takeover rumours, or to make a statement on any buy-out plans.

Santander bought Abbey in 2004 for £9.5 billion. Alliance & Leicester's market value now stands at around £2.97 billion.

Alliance & Leicester has become a target for takeovers following the Northern Rock crisis.

However, the bank funds two-third of its mortgage lending through customers' deposits and in November it announced funding facilities that would secure its lending until the third quarter of 2008.

Any deal for Alliance & Leicester from Santander would benefit thousands of shareholders who took a stake in the lender when it demutualised in 1997. However, any deal with the Spanish bank is not expected to see a cash payout, but an offer of shares.