Schroder speculation soars

Bid fever: Markets still rise on the back of another giant deal

"The frothiest market we've seen for a long time", was one broker's verdict yesterday on the Footsie's 44-point rise, with talk of a top-100 bid to be announced on Monday and bid speculation which sent shares in Schroder, Royal Bank of Scotland and Standard Chartered soaring, writes John Willcock.

Shares in Schroder, the merchant bank, rose over 100p at one point and finished 88p up at 1368p. Despite a small volume of shares traded - just 252,000 - brokers put forward NatWest Group and Dutch bank ABN Amro as leading candidates to launch a bid.

Schroder is still 40 per cent owned by the Schroder family. A spokesman for the bank commented: "There was not a big volume of shares traded - it was just buying interest. We haven't been talking to anyone, and no one's been in touch with us."

The merchant bank is in the middle of a strategic review to decide which bit of its securities arm to build up.

Elsewhere the market is expecting a big announcement from NatWest, possibly details on the sale of NatWest Bancorp, the group's American retail bank. The group is also known to be interested in expanding its investment banking and fund management activities both in London and New York. NatWest's shares rose 18p to 639p.

The FTSE 100 closed up 44.2 points at 3,568.0, just below its 13 September record close of 3,570.8, after earlier hitting a session high of 3,584.7. Dealers reacted to favourable US data and fear of being caught out by a mega-bid.

Financial stocks have been driven by bid speculation following this week's announcement that Lloyds Bank is merging with TSB. Royal Bank of Scotland is seen as an affordable target for the other high street banks like Abbey National, NatWest and Barlcays, and its shares rose 20p to 522p with 4.3m shares traded.

Rumours this week that Banco Santander might sell its 10 per cent stake in the Scottish bank persisted yesterday. Some dealers mentioned a price of 720 p per share. Standard Chartered is headquartered in London with big operations in the Far East, and as such is also seen as a possible target for the high street banks. Its shares rose 20p to 518p.