Bank of Scotland has said it will initiate "major surgery" on NatWest's branch network if it is successful in its hostile takeover bid.

The bank unveiled plans for 125 branch openings and further modernisations as part of its proposals to boost revenues at NatWest by £518m a year.

It said the extra revenue would help generate a rise in profits of £324m a year before tax.

The figures outstrip those proposed by the rival bidder, the Royal Bank of Scotland, which has said it will boost revenues by £390m a year and profits by £240m.

But the two bids remain finely balanced as the Royal Bank is claiming much higher cost savings from merging than Bank of Scotland.

Responding to Bank of Scotland's statement, NatWest said both it and the Royal Bank were running "unprecedented risks" with their hostile bids.

NatWest chairman Sir David Rowland said: "Bank of Scotland and the Royal Bank of Scotland are now arguing over who has the bigger organisation. The scale of NatWest dwarfs both.

"Shareholders can roll the dice with either, or benefit from the outstanding value and lower risk in a stand-alone NatWest."

Proposal

Detailing its revenue growth plans for NatWest, Bank of Scotland said the personal banking business at NatWest would generate most of the extra income.

George Mitchell, chief executive of personal banking, said: "This area is clearly crying out for major surgery."

If Bank of Scotland was successful in its takeover bid, it would open the new NatWest branches in the first three years, increasing coverage in the north east, east coast area and south Midlands.

It would also modernise 307 branches and relocate a further 378.

Beyond the three-year timetable, the bank would extend its revamp to the whole of NatWest branch network, currently 1,714 strong.

The plan is likely to include about 36 branch closures.

Neck and neck

The Royal Bank says if it takes over NatWest, combined expenses would be trimmed by £1.2bn.

Bank of Scotland has put its potential cost savings at £1.02bn.

Adding cost savings and profits growth, the Royal Bank is claiming it would boost the bottom line by £1.42bn in three years, while Bank of Scotland is claiming £1.39bn.

The profit projections add to an already close-run race between the two bidders.

Both have offered a mixture of cash and shares to buy NatWest, which vary in value as share prices rise and fall, but each bid currently totals about £21bn.

They have until 31 January to make any increase in their takeover offers and until 14 February to win majority support for their bid.