Banco Santander has agreed to sell half its custody business in Spain, Mexico and Brazil to FINESP Holdings, an affiliate of Warburg Pincus for £328 million.

As part of the agreement, a group led by Warburg Pincus that also included Temasek, a Singapore based investment firm, will buy 50% stake in Santander’s custody business.

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The deal values the business, which has €738 billion in assets under custody in Spain, Mexico and Brazil, at €975 million (US$1.3 billion).

In addition, the transaction will generate a net capital gain for the Santander Group of €410 million that will be used to strengthen the balance sheet.

Subject to legal and regulatory approvals, the transaction is expected to close in the fourth quarter of 2014 and the remaining 50% stake will be owned by Santander.

Javier Marín CEO Banco Santander said: "With this alliance, Santander will significantly increase its fund administration, depositary and custody business in markets where we are already leading providers. The transaction will enable us to increase and improve the products and services we offer our clients, with a higher value-added proposition adapted to their needs."

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Daniel Zilberman, managing director and head of its European financial services group, Warburg Pincus, said: "We are pleased to partner with Banco Santander to enhance the company’s focus on providing products and services to its customers in Spain and Latin America. The custody market benefits from long term structural growth and we look forward to supporting management in accelerating the company’s growth and service offering."