London, June 23: Speculation about the future of Britain's National Westminster Bank emerged again on Monday amid newspaper reports of a takeover or merger attempt by rival Barclays.

Barclays dismissed the suggestion as speculation and NatWest said it had not received any approaches, but interest in the fortunes of the bank -- triggered by last week's profit warning and the departure of investment banking head Martin Owen -- remained high.

Despite Monday's reports, sparked by a Sunday Telegraph article sourcing the bid idea to a Barclays "insider", most pointed out the problems any such move would face on grounds of competition.

Britain's high street is dominated by four main banks, Barclays, NatWest, Lloyds TSB Group and HSBC-owned Midland.

Both Barclays and NatWest are under pressure to improve their overall performances, which have been bruised by the enormous costs of their separate attempts to build up their investment banking prowess and compete with an elite club of such banks worldwide.

NatWest's approach to its investment banking arm NatWest Markets is undergoing a major rethink following the resignation of its chief last week and revelations in February of a 90 million pound ($149 million) loss in its derivatives arm.

The revelation it approached Britain's Abbey National Plc about a possible merger, but was rebuffed by the former building society, has fuelled speculation something radical is in the pipeline.

Expectations of consolidation in financial services worldwide, with super-banks offering a full range of products to all types of clients, has also intensified making rumours of possible new mergers or takeovers an almost everyday event.

Even if the rumours prove to be groundless, they will act as a further distraction to NatWest's senior management who are already under intense pressure to pull something magical out of the bag to quell growing shareholder disquiet.

Attention will remain on them this week with expectations of a report into its recent problems.

The Financial Times said the probe into the interest rate options mispricing, which NatWest has already found took place over two years, had cleared senior managers of collusion with a junior trader alleged to have been responsible.

Five managers who supervised the trader were suspended in March, although NatWest stressed this was was usual practice and did not imply guilt. The trader has denied any wrongdoing.

Last week Derek Wanless, NatWest's chief executive and acting head of NatWest Markets until a replacement for Owen is found, said the inquiry into what went wrong would be completed by the end of June.

The independent investigation by city accountants Coopers & Lybrand and law firm Linklaters & Paines has also been handed to the Bank of England and financial markets watchdog the Securities and Futures Authority (SFA), banking sources said last week.It is not clear whether the Bank of England or the SFA intend taking any action against NatWest over the affair. But it has heightened shareholder demands for a radical rethink of the bank's strategy and better returns.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.