National Westminster Bank has aggressively rejected takeover bids from Royal Bank of Scotland and Bank of Scotland, saying each entailed significant merger integration risks.

Significantly, the latest broadside from NatWest treats both Scottish banks in an equally hostile way, reducing further the chances of an agreed deal with Royal Bank of Scotland, which many had expected. NatWest's chief executive and chairman, Mr David Rowland, also said he could not see how either of the two banks could increase their bids because their limited resources were already strained to the limit.

"A deal is possible, but there's no point in speculating about it until the terms are very different and we cannot see at present that either of the two contenders have an ability to put those forward," Mr Rowland said. "We have to go back to see two institutions who are much smaller trying to buy a very large institution and straining all their resources to do so."

The Scottish banks are about a third the size of NatWest. Royal Bank issued its unsolicited bid for NatWest on November 29th and was initially seen as more likely to obtain a recommendation from NatWest's board because its approach was less hostile towards NatWest's management than Bank of Scotland's bid on September 24th.

NatWest's initially mild rejection of Royal Bank was seen leaving the door open for an eventual agreed deal with Royal Bank, but that prospect has progressively faded as NatWest's tone has hardened and as the value of Royal Bank's bid has fallen.

NatWest's first response to Royal Bank's document on Friday also hardened its tone. NatWest has said it will sell Ulster Bank, but the document contained no new information on the bids received.

Bank of Scotland has also said it would sell Ulster if its bid succeeds, but Royal Bank of Scotland would hold on to it.