By Jesús Aguado and Andres Gonzalez

MADRID (Reuters) -Santander rescinded the appointment of Alexsandro Broedel Lopes as its new chief accounting officer and has instead chosen Manuel Preto for the role, according to an internal memo by the Spanish lender on Wednesday seen by Reuters.

Broedel, who had been set to start in the role at Santander as soon as this month, faces litigation proceedings from his former employer Brazilian lender Itau Unibanco, which has accused Broedel of diverting funds while at the bank.

Broedel declined to comment. His representatives had previously said their client denied any misconduct.

A person familiar with the matter told Reuters earlier that Santander had decided not to proceed with Broedel. Santander declined to comment on Broedel and did not mention him in the internal memo.

The executive, who Santander had hired last year, was expected to replace current head accounting officer, Jose Doncel.

The bank said in the memo that Preto will replace Doncel, with his appointment becoming effective July 31.

Preto joined Santander in 1996 and has held various leadership roles in Santander Portugal and at a group level. Since 2019, he has been deputy CEO, chief financial officer and head of strategy of Santander Portugal, the bank said in the memo.

Santander's decision comes after Itau, Latin America's largest private lender, dropped a lawsuit against a past consultant but said earlier this week it would continue with litigation against Broedel.

Itau alleges that the consultant, in collaboration with Broedel, breached the bank's policies by engaging in irregular payments for consultancy reports.

It is not the first time that Santander has to row back on the appointment of a senior executive.

In one of the banking industry's biggest disputes over pay, Italian banker Andrea Orcel and Santander ended up in court after Spain's biggest bank dropped plans to make the former UBS investment banker its chief executive in January 2019.

On Monday, Itau confirmed it had reached a settlement with Eliseu Martins, under which the consultant agreed to pay an additional 2.5 million reais ($440,000) to the bank, bringing the total amount returned to 4 million reais.

Under the settlement, seen by Reuters, Martins said Broedel was his de facto business partner, collaborating on certain consulting work and accounting reports, receiving 40% of revenue generated by those services.

(Reporting by Jesus Aguado in Madrid and Andres Gonzalez in London; additional reporting by Luciana Novaes Magalhaes in Sao Paulo; Editing by Tommy Reggiori Wilkes, Alexandra Hudson and Bill Berkrot)