Shareholders hope the BSCH bid will spark other offers

Any move would rival an �8bn bid for Abbey by Spain's Banco Santander Central Hispano (BSCH), which the UK mortgage bank agreed to last week.

A spokesman for UK firm HBOS said its interest was in "the preliminary stages" and that no decision had been taken one way or another.

Shares in HBOS were down 2.2% at 697 pence by the close of trading.

Last week, HBOS's chief executive James Crosby dampened hopes of a UK bid, saying competition hurdles remained.

'Long way to go'

The rise in Abbey's share price values the company at more than the level of the Santander shares-plus-cash offer.

A combination of Edinburgh-based HBOS, the UK's biggest mortgage lender, and London-based Abbey, the second largest, would have almost one third of the UK's mortgage market.

ABBEY FACTS & FIGURES 741 branches More than 16 million customers Assets of �177bn as of end-2003 Created following the merger of Abbey Road Building Society and the National Building Society in 1944 Demutualised in July 1989 Shares were worth �1.30 at demutualisation Name changed from Abbey National to Abbey in September 2003 Track Abbey shares today Track HBOS shares today

"HBOS is very much in the preliminary stages and no decision has been taken one way or another," spokesman Shane O'Riordain said.

"The process has a long way to go and something or nothing may come of it."

He did not reveal the amount HBOS might be willing to pay for Abbey.

"We have a fiduciary duty to look at any approach," a spokeswoman for Abbey National said. "But we only have one offer on the table and that's the one we're recommending."

An article in the Sunday Telegraph newspaper claimed an HBOS counterbid worth �9bn ($16bn) could come in the next few weeks.

Corporate banking

A confirmed rival bid would be good news for shareholders, who have had to put up with several years of poor results and seen the bank fail in its foray into corporate banking.

The company was the first UK building society to demutualise and become a bank and has been the subject of many bid approaches, including an �18bn one from Lloyds TSB which was blocked on competition grounds in 2001.

When Abbey National abandoned its mutual status to float on the London market in 1989 it was the first of a series of demutualisations across the building society sector.

The bank now has about 1.8 million shareholders, many of them still private investors with only a few hundred shares.