The acquisition means that Santander’s market share in SME banking in the UK will grow from 3% to more than 8%.
The deal includes 311 RBS branches in England and Wales, seven NatWest branches in Scotland, with 40 small and medium enterprise (SME) banking centres, four corporate banking centres and three private banking centres and business from 1.8 million retail customers, 244,000 small and medium-sized enterprises and 1,200 mid-corporate customers.
The acquisitions will now be rebranded to Santander.
It includes the value of the RBS assets and a goodwill payment of £350m. The transaction is "expected to be completed in 15 to 18 months", once the necessary approvals are obtained, according to Santander.
The Spanish-owned banking group already owns the former Abbey, Alliance & Leicester and Bradford & Bingley brands in the UK.
RBS was required to sell the branches by EU regulators following a £54bn government bailout in October 2008.
Santander said that the acquisition further strengthened its retail banking business and significantly accelerated its plans in the segment of small and medium-sized enterprises.
The UK is one of Santander’s main markets contributing, 17% to the group's net attributable profit in the first half of 2010.
Emilio Botín, the chairman of Banco Santander, said: "This acquisition is a giant step for Banco Santander in the small and medium [sized] enterprises sector in the UK."
António Horta-Osório, chief executive officer of Santander UK, said: "The RBS and NatWest branch acquisition will accelerate our growth and improve competition in a sector vital to the UK economy."
The transfer of RBS’ and NatWest’s business to Santander UK will amount to approximately £21.5bn of assets and £22.4bn of deposits, involving two million customers and around 5,000 employees.
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