Abbey's share price soars after group confirms rival bid rumours.
HBOS said on Sunday night it was at the 'preliminary stages' of reviewing its position on Abbey, which last week agreed to an pounds 8.2 billion takeover by Spain's largest banking group, Banco Santander Central Hispano (BSCH).
With any interest from HBOS likely to draw out other UK banking giants, Abbey shares jumped 14 1 /2p to 581 1 /2p - well above the value of the BSCH offer price. HBOS headed in the opposite direction, however, falling 15p to 697p.
Like other UK banks, HBOS had expected to be stymied by the same competition rules which thwarted an pounds 18 billion Lloyds TSB bid for Abbey in 2001.
And even though a combined group would have more than a third of the UK mortgage market, the idea of a bid by HBOS has not yet been ruled out.
The statement from the Edinburgh-based company said: 'The process has a long way to go and something or nothing may come of it.'
The interest emerged after BSCH's approach for Abbey received a lukewarm response from both sets of shareholders, particularly as UK investors face the prospect of holding shares in a euro-denominated company. One reason for the interest of HBOS is that it may believe the competitiveness of the UK mortgage market allows it to overcome regulatory concerns.
Analysts also believe the emergence of a fifth major banking group - with the creation of HBOS in September 2001 - has changed the regulatory picture since the blocking of the Lloyds bid for Abbey.
But they added that a bidding war for Abbey remains unlikely, with the odds still stacked against either HBOS or another UK bank lodging an offer or Banco Santander Central Hispano upping its agreed price if a rival posts a higher one.
'We were rather surprised and we believe that HBOS bidding for Abbey is highly unlikely,' said an analyst with a UK bank who wished not to be named.
'Between now and a successful HBOS bid for Abbey National there would have to be a Competition Commission enquiry, so we would be talking about a period of many months before any deal may actually be concluded.'
While BSCH declined to comment on the possibility of the bank increasing its offer, an analyst at a leading local broking house said: 'I very much doubt Banco Santander Central Hispano will increase its bid for Abbey, given the opposition to the operation on the bank's board.
'Several board members apparently criticising the move as a personal whim of BSCH chairman Emilio Botin.'
Meanwhile, Caja Madrid analyst Javier Bernat questioned the motivation behind the HBOS announcement.
'It seems strange that HBOS would launch a bid for the bank now when it could have presented a much lower offer a few months ago when the heat was out of Abbey,' Bernat said.
'Whoever is prepared to pay more than Banco Santander Central Hispano is offering for Abbey had better have a clear strategy for generating value as Santander's offer is very reasonable.'