National Westminster Bank is considering selling non-core assets worth around £5 billion sterling as it scrambles to stave off Bank of Scotland's hostile takeover bid, banking sources have said.

NatWest would then use the proceeds to pay a special dividend or buy back shares to convince currently sceptical shareholders that it is worth 25 per cent more than Bank of Scotland's bid, the sources said. NatWest could raise the £5 billion by selling debt markets operation Greenwich Nat West, asset management unit Gartmore and Ulster Bank, they added.

Bank of Scotland has already said it will sell off various assets if its bid for NatWest is successful, including Ulster Bank. Banking analysts believe that Ulster Bank could fetch up to £2.5 billion with Irish Life & Permanent seen as a front-runner in the bidding, if the decision is taken to sell the Irish operations.