Banco Santander, the Spanish banking group, has agreed to buy the 8 per cent equity stake HSBC owns in Bank of Shanghai in a deal estimated to be worth EUR470 million.

Banco Santander, the Spanish banking group, has agreed to buy the 8 per cent equity stake HSBC owns in Bank of Shanghai in a deal estimated to be worth EUR470 million ($647 million), the bank announced in a statement. 

The actual financial terms of the transaction were not disclosed and Santander said it will have an impact of approximately 1 basis point on the group's capital.  The deal, which is still subject to approval from the China Banking Regulatory Commission, will make Santander the second-largest shareholder in BoS and its strategic international partner. 

BoS is the second-biggest urban commercial and retail bank in China, with total assets of EUR98 billion and a net profit of EUR902 million as at the end of 2012. It has 294 branches, with 231 based in Shanghai, where its headquarters and 70 per cent of its assets are located, and the others present in other Chinese cities. 

Under the terms of the deal, Santander will provide BoS with a permanent team of professionals to focus on risk management and commercial and retail banking. The units will also develop joint wholesale banking activities. Santander is now a newcomer to China, where it already has branches in Shanghai and Hong Kong, as well as a representative office in Beijing. In 2012, it became the first Latin American bank to win authorisation to operate in the Renminbi. 

HSBC acquired the stake in 2001 for around $63 million. The sale is in line with HSBC's ongoing efforts to cut costs and let go of non-core businesses worldwide.