Austrian lender Erste Group Bank AG is in discussions with Banco Santander SA to acquire a 49 per cent stake in Santander Bank Polska SA, in what could become one of Europe's largest banking transactions in recent years.

The potential deal, valued at approximately €7.3 billion ($8 billion) based on recent stock prices, would give Erste Group effective control as the largest single shareholder despite not having a majority holding, according to people familiar with the matter.

By purchasing less than 50 per cent, Erste would avoid triggering a mandatory tender offer for the remaining shares under Polish takeover laws.

Both banks confirmed the talks on Monday, with Santander stating it had "received interest from several parties" regarding its Polish unit. However, both institutions cautioned that "there is no certainty that the discussions will lead to an agreement".

The proposed acquisition would fulfil Erste Group chief executive officer Peter Bosek's ambitions to expand into Poland, one of Europe's fastest-growing markets. The IMF forecasts Poland's economy will grow 3.2 per cent this year and 3.1 per cent in 2026.

Erste Group currently serves more than 16 million customers across seven European countries and operates a brokerage in Poland. The acquisition would significantly expand its presence in Central and Eastern Europe.

For Santander, the sale would represent a strategic shift away from Europe under executive chair Ana Botin. The Spanish lender announced in February plans to buy back €10 billion of its shares over the next two years, potentially using proceeds from divestments to fund these efforts.

Santander Bank Polska, Poland's third-largest lender with approximately 7.5 million customers, reported record net income last year and has reached an all-time high share price. The bank posted assets of about 304 billion zloty ($81 billion) at the end of 2024 and currently has a market value of around €15 billion.

The Polish business represented 5.8 per cent of Santander group's profit in 2024, with net profit rising 18.8 per cent to €800 million.

Any transaction would require regulatory approval from the European Central Bank and national banking authorities, though approval is considered likely given that it is a deal within the European Union that wouldn't create a dominant market position.

Following the news, Erste's stock dropped more than 4 per cent while shares in Santander's Polish unit weakened by 2.2 per cent. Santander shares, meanwhile, rose 2.4 per cent in London and 1.4 per cent in Madrid.

The final decision on the deal is expected in the coming weeks, though negotiations could still fall apart if the two sides fail to agree on terms, and other potential buyers could emerge.

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