Scottish banks on the march amid takeover talk

MARKET REPORT

Scotland's two independent clearing banks are intriguing the stock market.

As most bank shares wilted Bank of Scotland and Royal Bank of Scotland marched ahead, with stockbrokers north of the border talking about nosy buying.

Bank of Scotland rose 12p to 290p (after 294p) and Royal Bank 10p to 586p (589p).

Such headway inevitably awakened takeover speculation, with some even wondering whether the two banks had decided that individually they were vulnerable to a strike but united they could see off most predators.

Royal Bank has for long been one of the City's favourite takeover candidates with its 9.8 per cent shareholder Banco Santander, the Spanish group, periodically mentioned as preparing to strike.

There are also suggestions of US interest, possibly sparked off by Royal Bank's plan to merge its US operations with those of the Bank of Ireland.

Royal Bank's shares have been as low as 378p this year and Bank of Scotland, which is buying the Bank of Western Australia, was down to 194p. It is nearly one-third owned by Standard Life, the big Scottish mutual, which would be unlikely to rush to support a hostile bid.

But it might back a merger with Royal Bank, if the deeply entrenched rivalry between the two can be overcome.

Insurance brokers had a lively time, with stories flowing of bids and deals. Some talked of a merger between Sedgwick and Willis Corroon; it was enough to lift Sedgwick 8p to 124p and Willis 4.5p to 146p.

Inchcape, which has pulled itself out of its long retreat, recovered another 12p to 230p on stories that it was about to sell its Bain Hogg division to a US broking group, and Lloyd Thompson was dragged into the debate, gaining 10p to 164p, a two-day advance of 22p.

The German interest rate cut for a time lifted blue chips to yet another peak but by the close a 24.1-point gain had been cut to 9.2, with the FT-SE 100 index at 3,671.6, nearly 9 points shy of its record.

A faltering New York added to the caution. Unless the US budget row is resolved, next week's expected US rate cut may be delayed.

Tomkins continued to score from its US acquisition, gaining a further 15p to 284p, but Vodafone, off 8p at 208.5p, was hit by poor figures from Nokia, the Finnish group.

Amstrad was another caught in the fall-out, falling 12.5p to 217.5p. The shares have dropped from 283p since two weeks ago, when chairman Alan Sugar said trading was tough.

Asda gained 1p to 106.5p following results but Acatos & Hutcheson, the edible oil group, tumbled 43p to 225p on a 46 per cent profits setback.

T&N attracted keen US buying, gaining 4p to 164p; Rolls-Royce, reflecting its analysts' meeting, was at one time up 6p but ended just 1p higher at 176.5p.

Dalgety, the pet food group, added 17p to 410p. It was said to be meeting analysts.

An old takeover favourite, Smith & Nephew, was little changed at 192.5p but dealers were alerted by brisk trading, a feature which has characterised the shares for much of this week. The company has for long been seen as a target for Johnson & Johnson, the US giant.

Sears, little changed at 100.5p, was heavily traded with some large lines going through; a hovering line depressed Transport Development, off 4p at 186p.

Southern Water, through SBC Warburg, completed its 16.9 million (9.9 per cent) share buy-back, getting most of them at 665p. The price closed at 667p.

Cordiant, the advertising group, gained 4p to 91p as its rights issue attracted a 97.1 per cent take up.

Allied Domecq lost Wednesday's euphoria, down 4p to 512p, as Warburg said sell.

Cadbury Schweppes lost 5p to 550p after James Capel cut next year's forecast pounds 22m to pounds 590m and said the shares were a sell down to 500p. Warburg was responsible for a 17p gain to 677p by Reckitt & Colman.

Oils remained firm, helped by the crude price. Shell, with the added incentive of Gulf of Mexico exploration prospects, jumped 17p to 860p, and British Borneo, also involved in the Gulf, gained 33p to 320p.

British Biotech, which has moved between 2,100p and 425p this year, was firm at 1,510p. Greig Middleton suggests a 1,896p fair value and if "key products progress through clinical trails as expected" 3,432p in a year's time.

TAKING STOCK

r Shares of Regent Inns, the managed pubs chain with around 50 outlets, continued their heady advance, gaining another 25p to a 654p peak. Some profit forecasts have been moved to pounds 6.5m from around pounds 6m.

Last year the company produced pounds 4.4m. The shares switched from the old 4.2 market to a full listing in May 1993, at 135p. The company then had 34 pubs.

r Another AIM recruit, Viewinn, has raised pounds 1.5m selling half its shares at 100p and is due to make its debut on Monday. The company has the technology that allows hotel television sets and telephone lines to act as information and communication terminals providing businessmen with a spread of services, ranging from ordering breakfast to obtaining stock market prices.