Branches of Clydesdale Bank and Yorkshire Bank could be merged with assets of Royal Bank of Scotland and Lloyds Banking Group in an attempt to create a new retail banking competitor in Britain.

National Australia Bank (NAB), which owns Clydesdale and Yorkshire, said that it had been approached by industry players over potential consolidation involving both of the banks.

“We have been approached by a number of players in the UK market to see how we could work with them to participate in that consolidation,” said Cameron Clyne, chief executive of National Australia Bank, at the bank’s annual meeting.

“We are going to explore and assess what value these approaches offer for NAB shareholders,” he added. “We’re watching closely. We aren’t sure what assets will be divested.”

The move would support the European Commission’s objective of creating a new competitor in British banking. Neelie Kroes, the competition commissioner, is forcing RBS and Lloyds to sell parts of their businesses as punishment for receiving state aid.

Lloyds, the 43 per cent state-owned bank, has abandoned plans to close down Cheltenham & Gloucester so that it can put the business up for sale.

RBS, the 83 per cent state-owned bank, has agreed to spin off its insurance arm and sell branches in England and Wales. It is also thought to be working on resurrecting Williams & Glyn’s, a brand that disappeared from the high street 24 years ago, so that it can then be sold off to reduce RBS’s market share in retail and commercial banking.

Several foreign banks, including Santander and BBVA, both of Spain, are keeping a close eye on the businesses about to be sold by Lloyds and RBS. There is also a cleaned-up version of Northern Rock to bid for after it was announced that it would be split into a “good bank” and a “bad bank”.

Northern Rock was rescued by the Government after a run on deposits in September 2007. The Government is keen to get the bank off its books as quickly as possible if it can achieve a reasonable price for the restructured entity. Tesco and Virgin are seen as potential buyers and a stock market flotation has not been ruled out. Big private equity houses are also mulling the idea of buying bits and pieces and combining them to create a new force in British banking.

Others are planning to build a new bank from scratch. Sandy Chen, the Panmure Gordon banking analyst, is trying to set up a lender targeting small businesses. Metro Bank, backed by Vernon Hill, an American entrepreneur, would consist of a small chain of branches in the area around the M25.

Mr Clyne said that NAB’s focus remained on the Australian market but that the bank had capital available to take advantage of “any sensible acquisitions”. “If we are going to go offshore, we need to say what is our point of difference,” he said.

Source: Times Online