Abbey National ready to join takeover boom

JOHN EISENHAMMER

Financial Editor

Abbey National, the bank, has made takeover approaches to both Alliance & Leicester and Woolwich as part of the revolution taking place in the financial services industry.

BAT, the financial services and tobacco conglomerate, is also actively talking to another building society, believed to be Bristol & West, and Royal Bank of Scotland has held recent discussions with Nationwide. Current negotiations could mean the change of ownership of pounds 90bn worth of assets.

Insiders said yesterday it was unlikely that any announcement to convert to a public company would be made by A&L or Woolwich this side of Christmas. But A&L's strategic preparations, in particular, are well advanced, as first revealed in the Independent in September.

The flurry of approaches has been prompted mainly by the Lloyds/TSB merger plan, which has forced a fundamental re-think among medium-sized players in the financial services sector.

The recent decision by Prudential to establish a deposit-taking service is also believed to have given added impetus to BAT's thinking along similar lines. Market speculation is focused on Bristol & West, the country's ninth-largest building society, as the preferred target for BAT's attentions. Like the Pru, BAT is keen to develop a facility for holding on to some of the funds from maturing policies instead of seeing them withdrawn to be deposited with high street banks and building societies.

Abbey National, which is still in the process of buying National & Provincial, following the first hostile bid in the building society sector, is believed to have rapidly revised its strategic thinking about the critical mass required for competitive advantage.

"Abbey is making the most urgent advances, in an environment where a lot of talking is going on," a well-placed building society source said.

A&L is seen to be a preferred target over Woolwich, which still has much more of a mutual image to it. Peter White, chief executive of A&L, is viewed in the industry as something of a maverick, leading a more open society.

Both A&L and Woolwich, as part of their current strategic deliberations, are examining their options for achieving greater size after they convert.

Abbey's interest in A&L has also been heightened by the potential of Girobank which, with some 1.5 million customers, is by far the largest telephone banking service in the country, some three times larger than First Direct.

With A&L embarked on a branch closure programme, Girobank's large client base gives the building society an attractive total of customers per branch.

Royal Bank of Scotland, which has been particularly unsettled by the size implications of the Lloyds/TSB merger, and the strength that the combined operation would have in Scotland, is keen to make an acquisition that would improve at a stroke its southern presence.

RBS has itself been the subject of bid speculation, which has driven its share price remorselessly upwards in recent months.