"I think it's applying a bit of political pressure," said Macquarie Equities bank analyst Graham Maloney.

Argus has campaigned over the last year for the government to drop its "four pillars" policy that stops mergers between NAB, Commonwealth Bank of Australia, Westpac Banking Corp and Australia and New Zealand Banking Group.

The government has applied the four pillars policy since the release of the Wallis report into the country's financial system in April last year, reducing the policy from six which included restrictions on mergers involving the two big life offices AMP Ltd and National MutualHoldings Ltd.

Aware of the comments by Argus, Australian Treasurer Peter Costello and prime minister John Howard said earlier on Friday the ban will be reviewed if the government sees evidence of new competition."For the moment the policy still stands. The policy is unless we are convinced that consumers will benefit and competition will be enhanced we are not going to allow any of the big four to merge with each other," Costello said.

NAB, Australia's largest and most profitable bank, has the most to gain from the considerable rationalisation possible if big bank mergers were allowed.Recent speculation puts Australia's smallest major bank, ANZ, as NAB's most likely target if the ban is lifted."I think is would be a very, very significant move for them to move their head office and I think at the moment the issues surrounding four pillars and to a lesser extent the (dividend) franking are probably not sufficient motivation for them to go through that substantial change," Maloney said.

NAB said onThursday it might not be able to pay fully franked dividends in the second half of the current year because of the growing proportion of its income flowing from offshore.

NAB spokesman Haydn Park said the bank had reached a point where more than half its business was offshore. He said the bank was concerned that if could not expand domestically it would not be able to access enough capital to grow the business and to invest in the technology required to survive in a new age financial services environment.

"It's not a A$10 million hit. You are talking about hundreds of millions over time," Park said.

Park said NAB also needed access to a larger equity market if it wanted to grow by acquisition. He said in the US banks were priced at about 16 times earnings but in Australia NAB was priced at about 11 to 12 times earnings."What Argus is saying is if you are restricted from growing here in Australia E.G four pillars, then we'll obviously continue to develop our business offshore and eventually out of greatcommercial need for access to relatively cheap capital...then we may be faced with a decision to move the office offshore," he said.

A Sydney-based bank analyst said he believed there was an element of justification and realism in Argus' comments but that in the short term Argus was essentially just applying additional pressure to the government."You are seeing a few companies rejigging their shareholder base in terms of what is the most efficient for them in terms of raising capital," the analyst said, pointing to James Hardie Industries an example of one company proposing to access the US equity market through an IPO.