Banco Bilbao may back BoS in NatWest battle

BANCO BILBAO Vizcaya, Spain's second biggest bank, has expressed interest in helping out Bank of Scotland in its pounds 26bn hostile bid for NatWest, the high street clearer.

The move raises the prospect of the fight for control of NatWest turning into a proxy battle between Spain's biggest banks. BSCH, Spain's largest bank, has already offered to subscribe pounds 1.2bn to support Royal Bank of Scotland's bid for NatWest.

Peter Burt, the Bank of Scotland's chief executive, has been reluctant to agree to allow BBV to underwrite a cash sweetener for the BoS bid, particularly as with the way the share prices have been moving over the past ten days the Bank of Scotland side is increasingly confident that it is capable of winning control of NatWest on its on own.

Based on last night's closing price the Bank of Scotland offer was worth pounds 15.77 a share, 157p higher than Royal Bank's offer whose see-through value stood at pounds 14.20.

Mr Burt believes that the simplicity of the BoS offer is one of its key selling points when compared with the rival bid from Royal Bank of Scotland which involves both BSCH and CGU, the insurance group tendering for shares. However, BOS may find it harder to resist BBV's offer of help if BSCH were to agree to increase the stake it is prepared to take in the enlarged Royal Bank from 6.5 per cent to somewhere closer to 30 per cent.

BBV took over its domestic rival Argentaria earlier this year. It recently struck a deal with Italy's Unicredito which is intended to lead to a full- blown merger in 2002 and also has its eyes abroad.

Said a well-placed source last night: "As things stand all Bank of Scotland need to do is find some way of bringing forward the pounds 1.20 special dividend and they will have won. However, there is still a possibility that this will go the full two months once RBS tables its offer document. In that case they will need to look at all the options."

The Office of Fair Trading's advice on whether to refer the Royal Bank bid for NatWest to the Competition Commission is understood to be ready to go the Department of Trade and Industry today.

Bankers say that given the steep fall in RBS's share price since the bid was tabled last week, the only way it can recover the lost ground would be for BSCH, its Spanish partner to put in another pounds 850m of cash. The earliest opportunity would be when RBS posts its offer document to shareholders.