Britain's Abbey National said yesterday it wanted to buy Bank of Scotland but the Scottish bank poured cold water on the idea, saying a deal looked unlikely.

Abbey National's move could draw Britain's banking heavyweights into a fresh bidding contest and there was some speculation that, if spurned, Abbey National might initiate a hostile offer or could itself become a take-over target for larger rivals such as Lloyds TSB or HSBC.

Abbey National's shares surged as the talks suggested the UK's fifth largest bank by market value was now firmly in play.

But investors hoping for an all-out bidding war could be sorely disappointed. Royal Bank of Scotland, busy digesting its own conquest National Westminster Bank, is not interested in mounting a bid for Abbey, according to industry sources.

Bank of Scotland chief executive Mr Peter Burt said his bank had begun talks on a possible merger with Abbey National in the summer.

Now Abbey National's chief executive, Mr Ian Harley, might be keen on a deal to silence critics of his bank's performance and ward off any predator that might be preparing an assault.

Bank of Scotland's response was frosty. "It seems unlikely that Abbey National's approach will lead to a satisfactory transaction for Bank of Scotland's shareholders," it said.

Banking sources said Abbey National's approach was structured as a full-blown take-over, with Abbey National management running the show in the merged bank. They said the latest talks had not yet seriously broached the subject of a price nor whether this would be paid in cash or shares or a combination of the two.

If Abbey National swallowed Bank of Scotland, it would create a £24 billion sterling group accelerating Abbey National's push to diversify away from its traditional mortgage business.