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Tuesday, 5 December, 2000, 17:49 GMT
Abbey confirms Lloyds TSB merger talks
Abbey National and Lloyds TSB logos
UK banking giant Lloyds TSB has approached rival Abbey National to talk about combining the two groups.

In a statement to the stock exchange, Abbey National said its chairman and chief executive had met their Lloyds TSB counterparts at the rival's "request".

According to Abbey National, Lloyds TSB "talked generally about its view of the business merits of a combination of the two groups". Lloyds also sent a letter to Abbey National, outlining "further details", which the bank's board would now consider.

The move is just the latest in a wave of consolidation sweeping the UK banking industry. Abbey National itself is currently in talks about a takeover of Bank of Scotland.

Lloyds TSB, meanwhile, is the result of the merger of Lloyds Bank and former savings bank TSB.

The combination of Abbey National and Lloyds TSB would create the UK's second largest bank, after HSBC. It would be worth about 53bn ($73bn).

Shares in the Abbey National have been rising sharply on the news.

Other former building societies have also been the targets of the clearing banks, with the Woolwich falling to Barclays Bank in August.

Progress on the Scottish front

Abbey, the country's fifth-largest bank and the second-largest mortgage bank, said its negotiations with Bank of Scotland were making "good progress".

Such a deal would create a 23bn company.

The Scottish bank was initially reluctant to link up with Abbey as it pursued its own expansion strategy.

Bank of Scotland is considered by experts as one of Britain's best-run banks, and only narrowly lost out to its arch rival Royal Bank of Scotland during the battle to take over one of Britain's largest banks, the NatWest.

The success of any combination of Abbey National with Bank of Scotland would hinge on whether the banks' two management teams could be forged into one.

Now Bank of Scotland says the Lloyds TSB approach had not destroyed the chances for a deal with Abbey National.

"We remain optimistic about the merits of our combination," said a spokesman.

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See also:

03 Dec 00 | Business
Abbey 'preparing 25bn merger'
03 Nov 00 | Business
BoS rejects Abbey National approach
14 Nov 00 | Business
Abbey targets the 'mass affluent'
03 Nov 00 | Business
Bank merger wave
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