UK's sixth largest player is midway through recovery plan

Abbey National has for some time been viewed as a potential takeover target by the City and banking analysts.

Abbey National has for some time been viewed as a potential takeover target by the City and banking analysts.

The group, which is the UK's sixth largest bank, is halfway though a three-year turnaround programme led by its chief executive Luqman Arnold. He has taken the bank back to its core retail banking after previous managements experimented disastrously with risky investments in bonds, aircraft leasing and other activities.

If Spain's largest bank succeeds in buying Abbey where others have failed, it will acquire a business which has been through a lot in the past three years. That has included plunging to its first ever loss after the bank sold off many of its disastrous investments. It has subsequently struggled to recover a strong position on the high street.

Mr Arnold has tried his best to revive the business following the disastrous diversification strategy pursued by his predecessor Ian Harley but he himself has been criticised for focusing more on style than substance. Shareholders have not all been sold on Mr Arnold's expensive rebranding strategy nor do they all see sense in his decision to assemble a cast of glamorous business figures including the TV mogul Lord Alli and Vittorio Radice, the former chief executive of Selfridges, to add pizzazz to the brand of the former building society.

Abbey is expected to reveal next week some solid progress in turning around the business when it posts its half-year figures. Nonetheless, after the turmoil of the past few years, Abbey shareholders will have to settle for a lot less than the £19bn that Lloyds TSB offered in 2001 - a bid that was thwarted by the competition authorities.