ABN Amro shares hit record highs yesterday, piling more pressure on talks between the Dutch bank and Barclays of the UK, as they race to agree a merger within 48 hours while fending off a rival three-way proposal from a consortium led by Bank of Scotland.

ABN Amro's share price surged nearly 6 per cent to €35.58 ($48.02), as investors anticipated the possibility of a higher bid from the rival consortium and approved profit figures that were released 10 days early.

The share movement increased the likelihood that the Dutch bank's board might be forced to recommend to shareholders a deal with Barclays that values the bank at less than its current share price.

That is one reason why ABN Amro and Barclays are understood to have revived discussions on a deal that would include the possibility of a partial break-up of ABN Amro, with the Dutch bank's US retail banking operations a candidate for divestment. Such a move would release additional immediate value for shareholders.

The banks are believed to be working towards a merger announcement tomorrow, when a period of exclusive talks with Barclays ends. However, it is unclear whether that goal will be achieved, with decisions awaited on some key issues, including regulatory oversight. Another outstanding issue involves the settlement of a US criminal investigation.

The Dutch bank said yesterday it was "actively exploring all possible options" to resolve a US department of justice criminal inquiry into dollar clearing activities. The affair relates to unlawful Middle East money transfers for which ABN Amro was fined in 2005 by US regulators.

It was reported on Friday that ABN Amro was negotiating a settlement, likely to involve a financial penalty without accepting liability of admitting wrongdoing. Barclays has made it clear to ABN Amro it would be uneasy about agreeing a merger before the affair was resolved.

The discussions have been lent a new urgency by the break-up proposal put to ABN Amro on Friday by RBS, of Spain and the Belgo-Dutch banking and insurance group.

Analysts at Keefe, Bruyette and Woods estimated the consortium could offer close to €40 a share for the Dutch bank, topping the €35 bid Barclays is thought to be close to making.

The decision to release first-quarter results yesterday was taken "in the light of recent developments and in order to be fully transparent", ABN Amro said. It unveiled a 30 per cent rise in earnings per share to 65 cent. - ( Financial Times service )