Spanish bank Santander has bought 318 UK branches from Royal Bank of Scotland for £1.65 billion pounds.

 The euro zone's biggest bank also said its parent had provided £4.46bn of equity capital to its UK business to "support organic and inorganic growth as well as a planned reorganisation of group companies in the UK".

Retail Spanish banking accounted for 22% of profit in the first half, versus 17% which came from the UK, Reuters reports.

The price of the deal could be adjusted when it completes, which is expected to be in December 2011.

Santander has been in exclusive talks with RBS and has long been the front-runner to buy the branches, attracted by its significant small and medium-sized business customers.

RBS, 83% owned by the UK taxpayer, was told to sell the branches as a price for taking billions of pounds in rescue funds from the Government.

Santander continues to expand abroad despite problems at home, where the bursting of a decade-long housing bubble and a euro zone debt crisis sparked fears over its banks and low growth.

A 'stress test' of Europe's banks last month showed Santander had a strong capital position.

The deal with RBS will add 1.8m retail customers and about 244,000 small and medium size business (SME) customers it has targeted for growth.

Santander will have about 1,645 branches, or 12% of the UK market, consolidating its position as the second-biggest home loan provider and lift its share of the SME market to over 8%.

It will be able to cut costs by folding the business into its existing UK business. It bought lender Abbey in 2004 and has since added Alliance & Leicester and Bradford & Bingley.