Abbey National, which vetoed the idea of a merger with NatWest three years ago, has rejected offers to step forward as a white knight for the high street bank.
But the idea of adding on an attractive life and pensions brand would be attractive, as Abbey is under pressure in the City because of the sharp fall in market share in its core mortgage market. Abbey would not be alone in its interest in L&G. Aegon, the Dutch insurance giant that looked at trying to trump NatWest's pounds 10.85bn, has been looking again since it became clear that the NatWest bid could fall apart.
HSBC, the banking giant, is keen to expand its life and pensions sales and could also make a move.
But City sources said last night that Abbey was the only group that could offer David Prosser, L&G's chief executive, a role as important as the deputy chairman post he was in line for at NatWest.