National Westminster Bank yesterday lost hope of remaining independent, leaving victory within the grasp of Royal Bank of Scotland (RBS).
NatWest's board met yesterday morning as it became clearer that RBS's £21.6 billion sterling (€35.1 billion) bid was gaining the upper hand over a rival offer from Bank of Scotland, and appears to have concluded that there was little to be gained by holding out longer.
NatWest directors still consider RBS's plans to be dangerously ambitious, and are unwilling formally to recommend the bid. But discussions have been taking place to find the best way of smoothing the hand-over to RBS.
RBS has said it will abandon NatWest's plans to sell Ulster Bank.
A statement is expected today indicating that, in the circumstances, it would be in shareholders' interests to accept the RBS offer.
"It sticks in the craw, but it's only reflecting reality," said one NatWest banker.
Bank of Scotland also implicitly conceded defeat. Mr Peter Burt, its chief executive, cancelled meetings with investors in London and returned to Scot land.
Nevertheless, a degree of uncertainty still hangs over RBS. If the dramatic slump in its share price continues, institutional shareholders still have time to change their minds before next Monday's deadline. By Tuesday evening, RBS had received written confirmation of backing from investors holding 18.01 per cent of NatWest's shares.
With Merrill Lynch Mercury, Schroders and Standard Life, NatWest's second, third and fifth largest shareholders, also coming out for RBS, the bank was assured of at least 29 per cent of the shares.
Mercury's and Schroders' declarations on Tuesday turned the battle decisively in RBS's favour.
Smaller institutions were quick to follow suit once it became clear which way the tide was flowing.
Prudential Portfolio Managers, NatWest's biggest shareholder with 4.76 per cent, is not expected to reveal its intentions before Monday.
However, it is believed to have sided with RBS, despite its parent's agreement with Bank of Scotland to buy NatWest's life assurance subsidiary.
The spreading realisation that RBS was set to win the drawn out battle for control of NatWest drove its shares sharply downwards yesterday.
From Tuesday night's close of £10.53, they dipped at one point as low as 860p, before closing 149p lower at 904p.
