Bank of Scotland has raised its hostile offer for National Westminster Bank, adding more shares and cash to increase the value of its bid to £24.9 billion sterling (€39.4 million).

The new offer, coming a day after the British government decided not to hold up a bid on competition grounds, attempts to forestall the threat of a counterbid from Royal Bank of Scotland. If it succeeds, Bank of Scotland could have secured control of a bank twice its size by Christmas. It has promised to sell Ulster Bank if it gains control of NatWest, while NatWest is also promising to sell off Ulster as part of its defence. The attitude of Royal Bank of Scotland to Ulster is unclear.

Irish Life & Permanent and Bank of Ireland have made a joint indicative bid for Ulster Bank, as has AIB. NatWest will not say if there are any other indicative bids.

NatWest, which has until midnight tonight to make its final defence against Bank of Scotland, has not received a formal approach from Royal. But the latter, which has made no secret of its interest in NatWest and has yet to receive competition clearance, has been in contact with the English bank's advisers. It now appears poised to enter the bidding. It said yesterday that Sir George Mathewson, its chief executive, would replace Viscount Younger of Leckie as chairman on January 18th, 2001. Mr Fred Goodwin, deputy chief executive, will succeed him.

Bank of Scotland's revised bid offers 1.75 shares and a £1.90 loan note for each NatWest share. Its initial offer, made in September, proposed 1.6 shares and a £1.20 loan note. At yesterday's closing price the new terms amount to £14.57 per NatWest share. NatWest shares rose 47p yesterday to £15.18. Bank of Scotland fell 43p to 724p, while Royal Bank of Scotland dipped 14p to £13.28.