Spanish bank Santander has not ruled out resuming negotiations with the UK mortgage lender Alliance & Leicester, according to newspaper reports.

Talks believed to be held in mid-December fell through because the price the Spaniards were prepared to offer was not attractive enough. However, Santander is not thought not to have ruled out coming back with an improved offer.

The renewed bid chatter sent the shares up 50p, or 7.7% in early trading to 698 pence. Alliance & Leicester has seen its shares suffer in the past year because of concerns about liquidity.

Santander, which already owns British banking group Abbey, was attracted to Alliance & Leicester by its portfolio of business clients, according to the reports. By adding Alliance's business clients to the Abbey franchise, it is thought Santander could bring forward its expansion programme for Abbey by two years.