Citibank is in talks to sell its Spanish retail banking arm to Banco Popular Español, the Spanish lender confirmed.
According to the local media, the deal will also include the network of 45 branches, portfolio of 1.3m credit cards and 300 employees.
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Banco Popular declined give any details on the potential deal, saying: "Any definite agreement that might result from this process of negotiation will be communicated to the market in due course."
The move has been read as a sign of growing confidence amongst Spain’s crisis-battered banks.
Banco Popular was hit hard by the country’s post-2008 housing bust and recession and was one of the few non-nationalised banks that failed stress tests at the peak of the economic crisis in 2012.
The potential deal has also been seen as an indicator of an increasing trend towards consolidation in the previously overbanked Spanish market.
The sector was thinned out by the economic crisis and it is expected to be dominated by just five or six large banking groups in the future; Santander, BBVA, Caixabank, Banco Popular, Banco Sabadell and Bankia.
The Spanish media has speculated that foreign banks Barclays and Deutsche Bank may also seek to scale back their operations in the country.
British bank Lloyds sold 28 branches to Banco Sabadell last year and it has been reported that Barclays is trying to hire an investment bank to sell its Spanish business.
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