The government is to nationalise Bradford & Bingley after hammering out a deal with the Spanish bank Santander, which will buy the embattled UK mortgage lender’s £21bn deposit book and branch network for about £600m.

The bank is set to be taken into public ownership today after B&B saw retail savers withdraw 'tens of millions of pounds' in recent days as uncertainty grew. On Saturday, the government invited bids for B&B’s £21bn retail deposit base and branches as well as inviting offers for its head office and its mortgage loan book. After 12 hours of talks, Santander last night agreed to buy the network of 197 branches and 140 agency outlets as well as the retail deposits.

Santander will immediately be able to recoup £200m of capital that supports the branch network, and so it is actually paying closer to £400m. A statement is expected before markets open today at 7am. If completed, the deal would see Santander, which already owns Abbey and is taking over Alliance & Leicester, holding 1,200 branches in the UK. It will also be able to add £21bn of retail deposits to its existing £68bn of retail savings.

Today, B&B branches will open as usual and will remain branded as B&B for the foreseeable future. The government is expected to nationalise B&B’s £42bn mortgage loan book, which consists of risky buy-to-let and self-certified mortgages with rising arrears.

Financial Times, The Times, Daily Telegraph, BBC