THE Royal Bank of Scotland is expected to announce early this week that it has accepted #5m compensation as the price for dropping its #630m takeover of the Birmingham Midshires Building Society.
In addition, the bank will receive #10m if the building society is taken over by Halifax.
The Yorkshire-based building society-turned-bank has offered the Midshires members a total of #780m if they would agree to its merger approach.
The Royal could not count on the support of the account holders despite its promise to maintain Midshires as an autonomous unit whereas Halifax will subsume the Wolverhampton-based financial services group into its overall structure.
There is yet another swirling of rumours surrounding the Royal and the approaches that may or may not have been made by Halifax and also that there is a division of opinion on the Royal board as whether there should be talks.
That was angrily denied by a bank spokesman as being unfounded and scurrilous.
The speculation is being intensified as Halifax, with a market worth of #23bn compared with Royal's #9000m, is increasingly seen as having a #4000m pocketful of money but cannot decide where to spend it.
Analysts have been saying over the past few weeks that Halifax is seen to have a major problem in that its share of the new mortgage market is dropping.
It is losing share to the increasing number of new entrants and also the fightback by the traditional building societies which are offering better rates to both borrowers and savers.
Acquiring Midshires would be a useful infill but not add substantially to earnings growth.
There have been suggestions that the Royal would be interested in doing a deal after claims that it is short of capital.
This was emphatically denied by a spokesman yesterday.
An analyst with one major broking house is forecasting that the Royal will have tier one capital (effectively shareholders' funds) this year of about 6.5%.That compares with the 4% minimum laid down by the Bank for International Settlements and, perhaps more pertinently, the 6.4%-6.8% range cited as being ideal by Barclays chief executive Martin Taylor for Britain's second-biggest domestic bank.
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