Aussies fuel bid talk at the Abbey

BID hopes flared up again at Abbey National to lift its shares 45p to 840p on talk of an offer from National Australia Bank. When bankers played down the possibility, the shares eased to 826p.

But they still rose strongly in defiance of the market, with 16.2m shares traded. Many think Abbey chief executive Ian Harley needs a deal.

National Australia, owner of the Clydesdale, Yorkshire and Northern banks, has long been touted as a bidder for further UK banks. It tried unsuccessfully for a 'dual listing' merger with Bank of Scotland two years ago. But its ambitions have been checked after it took a £1.4bn write-off in the US.

Some of the smart money in the Abbey bid stakes is moving towards the Bank of Ireland, which has a new and ambitious chief executive. There would be several hurdles to overcome before a deal.

The Bank is smaller than Abbey, but has a strong commercial lending side that would be attractive to Abbey. It has steered clear of the troubles besetting its rival, AIB. Top bankers see a combination as potentially a repeat of the successful Halifax-Bank of Scotland merger.

In Dublin, the Bank reported a solid start to its current year, though warning that its fund management side has been affected by stock market falls. Its shares fell 23p to 728p, valuing it at £8bn compared with Abbey's £12bn. But its market value has been growing fast, while Abbey's has slumped one third in 12 months.