Bank of Scotland has said it could reap savings of more than £1 billion sterling (€1.54 billion) if its £21 billion hostile takeover bid for NatWest is successful. It also reiterated its intention, if successful, to sell Ulster Bank.

The proposed savings are much higher than many City estimates and sparked a tit-for-tat exchange between the already warring groups.

Mr Peter Burt, chief executive of Bank of Scotland, defended the high savings promised by launching a fresh swipe at NatWest's management.

"In this particular case we are looking at a relatively inefficient operation in NatWest . . . we would expect there to be more substantial cost savings than from a more conventional merger," he said.

But Sir David Rowland, chairman of NatWest, dismissed the Bank of Scotland savings plans as "heavily-qualified and unsubstantiated".

He argued NatWest could create the majority of the savings itself without any need of a takeover.