Australia's biggest bank, National Australia Bank, and insurance and fund management giant AMP have denied that they are planning an A$80bn (�29.3bn; US$42bn) merger.

The move has been widely reported in the Australian press.

A merger would continue the shakeup of Australia's financial services industry, as the big four banks - banned from merging with each other - look for other ways to gain scale.

It would also, analysts say, lead to a shakeup in the UK, where both NAB and AMP have been actively chasing takeovers.

Denial

The two companies, however, say the press speculation is untrue.

"In response to a specific requirement of the Australian Stock Exchange query made of the National today, we advise that the National is not in merger discussions with the AMP," NAB said in a statement.

AMP chief executive Paul Batchelor, meanwhile said there had been "no discussions whatsoever in 2001" concerning a merger or a takeover.

"I trust this statement puts an end to these rumours, as they adversely impact AMP's employees, customers and shareholders."

Four pillars

Neither the denials nor the risk of antitrust problems have not stopped the rumour mill, though.

Following AMP's rejection of a takeover offer from NAB in 1999, the speculation resurfaced in June, driven by a consolidation spree in the Australian and New Zealand financial services industry.

Australia's four biggest banks are forbidden from merging with one another under the government's "four pillars" policy.

The number two bank, Commonwealth Bank of Australia, bought financial services group Colonial for A$9.4bn last year.

That made it the biggest fund manager in Australia with A$100bn of assets under its wing. An NAB-AMP tie-up, with combined assets of A$125bn, would retake the top spot.

UK repercussions

Should a deal emerge, the key synergies would be in the UK, analysts said.

Both firms have been keen to expand into the UK market: NAB owns three regional lenders and the National Irish Bank, while AMP now owns four investment and life assurance companies including London Life and NPI.

But NAB has been disappointed in its recent attempts to buy a commercial bank, and is thought to need the extra financial muscle that a merger could provide.