Lloyds TSB has dismissed reports that it is preparing to wade into the bitter takeover bid for NatWest.

Reports had suggested it was planning to make an offer for the Royal Bank of Scotland - one of the NatWest bidders. But on Monday, officials from Lloyds TSB said talk of its alleged bid was simply "market speculation" and the Royal condemned it as a "spoiling tactic".

The latest move in the banking takeover war comes just days before City institutions plan to announce which bank has been successful in its bid for NatWest.

The intense interest over which bidder - the Royal Bank of Scotland or the Bank of Scotland - will win has also raised the prospect of what will happen to the loser.

So far, City support for the Scottish banks seems evenly split - although the US investment house Lehman Brothers has urged shareholders to accept the Royal bank's offer.

It appears that what is going to make the difference is the votes of the big institutional shareholders including Standard Life.

Investors are set to decide on 14 February whether NatWest will stay independent or be taken over.

Reports that Lloyds TSB was interested in the Royal came in the Sunday Times.

It said Lloyds TSB chairman Sir Brian Pitman and Peter Ellwood, its chief executive, were considering a take-over move.

Since it announced its plans to bid for NatWest, the Royal's share price has fallen and this has made it vulnerable to attack.

If Lloyds were to make a move on RBS this week, it increases NatWest's chances of remaining independent, observers say.

Strong financial results

Lloyds is set to release strong financial results on 11 February, and the results are likely to focus attention on the bank's expansion plans in the UK.

Next Monday NatWest shareholders can either vote for the RBS bid, the Bank of Scotland bid or to remain independent.

Fears that shareholders do not want the bank to stay independent may prompt NatWest to recommend one of the rival bids to shareholders before this deadline is up.

A split vote, where the Scottish banks together win more than 50% of the vote, but fail to secure the necessary 50% individually, could allow NatWest to remain independent.

Increased offer rejected

NatWest has already rejected the increased take-over offers from its two Scottish rivals.

The rival bidders increased their offers to around £24bn ($38.4bn) last week.

The Bank of Scotland's new offer is larger in total.

NatWest shareholders would own 70% of the combined group, which would be headed by BoS chief executive Peter Burt.

BoS would sell off Gartmore, Greenwich NatWest and Ulster Bank and would undertake "major surgery" of the branch network with 21,800 redundancies.

Bigger stake

The bank claims its bid is worth £1bn more than Royal bank and gave NatWest shareholders a bigger stake in the combined group.

The Royal Bank is offering more cash.

NatWest shareholders would own 62% of the combined group, which would be headed by RBS chairman Viscount Younger.

RBS would sell off Gartmore and US Greenwich NatWest but keep UK Greenwich NatWest and Ulster Bank. It has no plans to close branches but does expect 18,000 redundancies.

Its biggest shareholder, Spanish bank BSCH, is contributing additional cash of up to £500m to back the new bid.