Dutch bank ABN Amro yesterday formally withdrew its recommendation of a takeover offer by Barclays. But the bank made clear it still favours the British bank's offer over a higher bid from Royal Bank of Scotland's (RBS) consortium.

The Netherlands' biggest bank, the target of a €64 billion offer from Barclays and a €70.6 billion bid from RBS, Belgium's Fortis and Spain's Santander, also reported a 7.1 per cent decline in its second-quarter net profit yesterday.

ABN originally backed Barclays when announcing their merger in April, in a friendly deal that would have kept ABN mostly intact and the combined group's headquarters in Amsterdam.

But ABN withdrew its recommendation even after Barclays sweetened its all-share offer last week to include some cash.

However, ABN did not endorse the rival RBS consortium's mostly cash offer.

It said Fortis faced a challenge in raising the capital needed to fund its part of the bid for ABN.

"We continue to support Barclays' offer because we feel overall Barclays' merger plan is to the benefit of all stakeholders," chief executive Rijkman Groenink told reporters, but added ABN was taking a neutral stance on the competing bids.

"The consortium's offer is uncertain. There is the Fortis shareholders meeting that has to approve the share issue," Mr Groenink said.

Fortis shareholders are due to vote next week, on August 6th, on a key rights issue to raise the cash.

Barclays said it will continue with its bid and waived a precondition of its latest offer that ABN recommends it. Under takeover rules ABN could still make a fresh recommendation but is not required to do so.

"We are confident that our revised offer delivers the value, stakeholder benefits and certainty that will allow the boards to support a recommendation in due course," Barclays chief executive John Varley said in a statement.

ABN could move to recommend either bidder, depending on how the consortium's financing shapes up and whether the Barclays share price rises to improve the value of its bid.

Barclays' offer is almost two-thirds shares, but the stock fell 7 per cent last week in a turbulent stock market. The RBS-led consortium's offer is 93 per cent cash. - (Reuters)