BoS prepared to talk

Peter Burt, the chief executive of Bank of Scotland, is insisting that Abbey National should drop its demand that BoS agree to be taken over before accepting a request for a meeting between the two banks later this week.

Peter Burt, the chief executive of Bank of Scotland, is insisting that Abbey National should drop its demand that BoS agree to be taken over before accepting a request for a meeting between the two banks later this week.

Lord Tugendat, the chairman of Abbey National, who returned from a business trip to the Middle East at the weekend, will today renew attempts to secure a meeting between key executives from both sides in an attempt to cool tempers and forge a merger deal.

The Abbey National chairman is said to have been unhappy at the way attempts by his chief executive, Ian Harley, to force the pace of negotiations backfired over the weekend.

Far from receiving widespread support for the idea that Abbey should be in the driving seat, initial City reaction was that Mr Harley had merely succeeded in putting Abbey National itself at risk.

Peter Burt, who returned from New York at the weekend, was yesterday talking to his City advisers, other members of the board and key shareholders before deciding his next move.

Mr Burt believes he has strong support for his view that a takeover by Abbey of BoS, with Mr Harley in the driving seat, would be regarded in the City as destructive of shareholder value.

He also believes there are still merits in the proposal he made earlier this year for a no-premium merger, with Mr Burt as chief executive and Mr Harley as deputy. Mr Burt is due to step down at Bank of Scotland in four years' time and Mr Harley would be the obvious successor. A source said last night: "Harley is only 50. What is all this impatience?"

Mr Burt believes that Bank of Scotland's senior staff have played a greater role in the bank's success than is widely recognised and that it would be sending a highly demotivating signal to those staff if he were to step aside for Mr Harley.

One analyst said yesterday: "Mortgage growth at Bank of Scotland in the first half of the year was 17 per cent, compared with 5-10 per cent for Abbey. If we are talking about quality of management, there is clearly no contest."

Mr Harley is believed to have spurned approaches from both Lloyds TSB and Barclays Bank because it would have entailed him having a subsidiary role, potentially large job losses among Abbey staff and a junior role for an organisation that has grown faster than the clearing banks.