Abbey National pursues Cater

Abbey National has emerged as the mystery suitor for Cater Allen in a bid that could value the former discount house at up to pounds 200m. The bank, which was only recently linked to high- street rival NatWest, said it would make a further announcement soon.

Cater Allen's shares soared earlier this month by more than 100p to 562p after the company said it was in talks that might lead to a bid. The shares closed 2.5p lower yesterday at 547.5p.

Apart from its traditional role as a discount house - essentially a go- between for the Bank of England and the big clearing banks - Cater Allen has a successful offshore investment operation in Jersey.

It also owns CaterDeal, the execution-only broker it bought in 1995 for pounds 7.25m.

Earlier this year it bought Aitken Campbell, the Glasgow market-making offshoot of Union, and said it planned to integrate the firm with its own broking business. The proposed sale of Cater Allen comes after the discount houses lost their exclusive right to act as broker between the Bank of England and the commercial banks, a role Cater has fulfilled since 1815.

Cater has struggled to deal with interest-rate movements and profits for the six months to October showed a 40 per cent fall to pounds 5.4m after the firm was caught out by a surprise increase in rates.