Peter Ellwood, chief executive of Lloyds TSB, is believed to be preparing a fresh approach to reopen merger talks with Deutsche Bank, its giant German rival.
Negotiations between Mr Ellwood and his opposite number at Deutsche, Rolf Breuer, fell apart in the summer after the two failed to agree on key points that would have led to an £80bn deal to create one of the world's largest banks.
Among key sticking points were Mr Breuer's insistence that the group be headquartered in Frankfurt and the structure of the management of the combined group.
However, moves are afoot at Deutsche to force Mr Breuer to stand aside, taking early retirement and handing the helm to Josef Ackermann, architect of the bank's massive expansion into investment banking and fund management. Mr Ackermann is Swiss and has spent much of his career in New York and London.
Mr Breuer is due to step down in favour of Mr Ackermann next May. But at a meeting of 50 senior managers last weekend, Mr Breuer's strategy for the bank was openly criticised and there were calls for him to stand down immediately. He met with institutional investors in the City last week, and denied he would be leaving before May. However, there is a feeling in banking circles that he is now a "lame duck" chairman and that Mr Ackermann is effectively in control of the group.
Senior financial sources say the imbroglio within Deutsche could give Mr Ellwood the opportunity to restart talks. A spokesman for Lloyds TSB admitted merger talks had been held earlier this year but said that nothing was going on at the moment.
The two banks would be highly complementary. Lloyds TSB is mainly based in the UK, with almost no investment banking operations, and no international network apart from in Latin America. Deutsche has a large German retail operation, a substantial international network, and one of the world's largest investment banking businesses.
The two groups have hardly any overlap and would be unlikely to face a competition investigation. Lloyds TSB recently fell foul of the UK's Competition Commission when it blocked the £18bn bid for Abbey National. Analysts have said that, with Mr Ellwood due to retire in 2003, there could be a clear succession structure, with Mr Ackermann becoming deputy chief executive and taking over the main job in 18 months' time.
Though a merger with Deutsche is Lloyds TSB's preferred option, it has emerged that Mr Ellwood has been casting his net widely. The bank has held talks with two US institutions – Bank One and Wells Fargo – a move that will surprise many City analysts who were told by Mr Ellwood that Lloyds TSB was seeking a European deal.
The bank now says it is merely seeking an international deal as its ability to grow in the UK market is restricted. Last week City traders speculated that the bank might make an offer for Standard Chartered. However, this has been played down by Lloyds TSB and dismissed by Standard Chartered.