Abbey calls off BoS talks

Abbey National has called off its long-running efforts to merge with Bank of Scotland.

Abbey revealed that it had terminated merger talks with BoS, over complications presented by the counter bid from Lloyds TSB.

Abbey National has today terminated discussions with Bank of Scotland regarding a potential merger

Abbey statement

Lloyds TSB has offered £19.8bn for the former building society.

But the bid has been referred for clearance to trade watchdogs the Competition Commission.

"In light of the continuing uncertainty created by Lloyds TSB, which may or may not be able to put an offer to Abbey National shareholders later this year, Abbey National has today terminated discussions with Bank of Scotland regarding a potential merger," the bank said in a statement to the London Stock Exchange on Wednesday.

Shares rise

Abbey and Bank of Scotland had been talking since November last year, but a merger plan had not been finalised.

The news sent the shares of all three banks upwards.

Abbey National shares closed up 38p at 1167p.

Lloyds TSB, now seen as a more likely partner for Abbey, saw its shares rise 8p to 656p by the end of the day.

Bank of Scotland shares also closed higher, up 17p to 755p.

It is the second recent blow to Bank of Scotland's hopes of merging with a rival UK bank, following its attempts to hook up with NatWest.

Bank of Scotland said that it is "disappointed by this news as we still believe firmly in the compelling logic of this merger".

The news is likely to fuel speculation that Bank of Scotland may now look for another partner.

National Australia Bank is known to have sought talks with the Scottish bank last year, while there have been rumours in the City that Barclays may be a potential bidder.