News of the pounds 11.5bn Anglo-Irish tie-up sparked a bid-rumour feast in the sector which enlivened the quietest day of the year for the market.
One of the more intriguing whispers was that the deal might prompt Lloyds TSB, renowned for its acquisitive tendencies, to strike at A&L.
The prospect of a counterbid from Lloyds combined with the market's appreciation of the merger with BoI, up 51p to 1,283.5p, sent the A&L shares 59.5p higher at 929.5p.
Some cunning dealers think that Lloyds, down 4p to 864.5p, was waiting for a fall in A&L's share price to launch an offer and that the BoI deal might force it to put up or shut up.
The rationale behind this argument is simple enough. Some market watchers believe that the A&L-BoI fusion could act as a poison pill against potential bidders for the UK lender.
Apart from the size factor - the combined group would have a pounds 12.6bn market value - would-be predators are likely to be deterred by the new A&L's Irish exposure.
Ireland is a complex market, partly because it is in the European Union, and not many UK banks are willing to take the plunge.
Much better, according to this school of thought, to buy A&L when it is still a cheap'n'cheerful former building society. Others, however, pointed that if Lloyds was prevented from buying A&L by the rules protecting former mutuals until 2002, it could go for BoI.
Royal Bank of Scotland, 40p higher at 1,382p, and Barclays, down 1p at 1915p, were also mentioned as potential gatecrashers, although a merger between the two is still possible. Abbey National, up 4p to 1,301p was also in the frame.
Former building societies were in demand as A&L-BoI deal suggested that their takeover protection could be circumvented.
Halifax shot up 32.5p to 810.5p, while the Woolwich was 16p higher to 412.25p, as an array of takeover combinations were mooted. Two sector reviews by Goldman Sachs and WestLB Panmure also helped.
Legal & General, a rumoured Lloyds target, lost 9.25p to 178.5p as its suitor appeared to turn to other targets. However, volume was high and some big players still believe that L&G will be taken out soon. Norwich Union remained a bid target and put on 2.25p to 440p.
The financials' frenzy was completed by Independent Insurance which rose 16p to 285p on the return of vague takeover speculation.
The rest of the market had a boring day. The FTSE 100 closed 31 lower at 6,322.1 after a weak start in the Dow reversed the banks-inspired rally.
Holidays in Europe and a lacklustre Wall Street deprived London of any direction, and volume was the lowest since the start of the year. The undercard barely moved, with the mid cap ending down 8.2 to 5,710.1 and the Small Cap rising a tiny 4.4 to 2,570.5.
Rank was subjected to rehashed bid rumours. The troubled leisure group rose in the morning on talk that venture capitalist Cinven was interested. However, the story looked short of breath by the afternoon and Rank settled 2p lower at 232p.
Carlton beamed 25.5p higher at 553.5p as Merrill Lynch said "buy" and targeted 650p. The decision to give away the OnDigital TV kit also helped. Co-owner Granada jumped 19p to 1,238p.
The decoder-maker Pace Micro Technology buzzed 12p higher to a 12-month peak of 199.5p. The oils rose smoothly after broker BT Alex.Brown went bullish on the crude price and the UK majors. Shell drilled a 15p advance to 460p amid continued talk of a strike at BG, down 0.75p at 358p. BP Amoco advanced 11p to 1,149.5p.
Centrica motored 4.25p ahead to 127p amid speculation that it might bid for Green Flag, to be sold by owner Cendant, as well as the AA.
United News & Media firmed 16p to 678p after a rumoured approach by the Barclay brothers for its Express newspapers.
BT was off the hook, falling 57p to 1,080p as the market was frightened by talk of free Internet calls. However, the phone giant's link-up with Photo-Me to plug the Net into photo-booths helped the picture company soar 131.5p to a best-ever 702.5p. TownPages, a US-based Internet group, could soon provide some competition for the new venture.
Glaxo Wellcome lost a sickly 84p to 1,732p as broker Sutherlands downgraded following last week's lukewarm trading update.
Smaller rival Medeva injected 4.5p to 110p into its depressed share price after predicting an end to its profits decline. The biotech group SkyePharma rose 4.5p to 59.5p after the US launch of one of its star products.
The plant hirer Hewden-Stuart collapsed 19.5p to 136p after a surprise profit warning. WH Smith shed 32.5p to 639.5p. The market believes that paying 525p a share for publisher Hodder Headline - up 147.5p to 515p - is too much.
Among the small cappers, Royal Doulton rose 18.5p to 135p on returning talk of an overseas strike, while Baltimore, the old Zergo, spiked 32.5p up to a record 867.5p on talk of a big US contract win.
The engineer GEI lost 3.5p to 23.5p as dealers feared more bad accounting news.
The builder YJ Lovell crumbled 1.75p to 14p after selling its social housing unit to rival Morgan Sindall for just pounds 15m.
SEAQ VOLUME: 811 million
SEAQ TRADES: 66,415
GILTS INDEX: 107.96 +0.15
ARTHUR SHAW, a cash shell, yesterday moved from building materials to music on the web in one clean swoop. The stock soared over 113 per cent to 4p after the company bought a music Internet business from the multimillionaire impresario Bryan Morrison - the man behind Elton John and Pink Floyd. The all-share deal will enable Shaw to pipe live pop concerts on the Net, giving it a key presence in the burgeoning on-line music market.
GOOD NEWS for the top executives at ERA Group. The owner of the Beatties toy shop chain rose 1.5p to 9.25p as speculative buyers moved in. If the stock stays here for another couple of weeks, chief executive David Wood, finance director Andrew Mallet and marketing head Nigel Cliffe will share a bonus of over pounds 200,000 in shares. The awards are part of an unusual scheme to base executives' rewards on the group's market value.