Merger push on ice for battered small lenders

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Santander and other well-financed lenders may prefer to cherry-pick better quality mortgage business, as smaller rivals have withdrawn from the market, and as margins have risen sharply, and because organic growth is a less risky approach.

"(Consolidation) will occur, but it is difficult at this point in the cycle," said Leigh Goodwin, analyst at Fox-Pitt Kelton. "There is not a lot of strategic attraction in taking on those smaller players in a way there would be if the market was better," he said.

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