RBS, Santander eye rival bid for ABN - source

LONDON, Apr 10 (Reuters) Royal Bank of Scotland and Spain's Santander are in exploratory talks over a possible joint bid for ABN AMRO, stepping in as rivals to suitor Barclays, a source familiar with the matter said.

Britain's Barclays said last month it was in exclusive negotiations with ABN to strike the biggest-ever bank takeover and create a lender worth some 0 billion. The talks are expected to last until around April 18.

Newspaper reports over the weekend -- following mounting market speculation last week -- said RBS and Santander were considering a counter-bid as next week's deadline approaches.

The source confirmed to Reuters on Tuesday that the two parties are in talks, though the negotiations are still at an early stage.

The banks have yet to agree on a price or on the exact split of ABN's assets, the source said, adding neither bank was certain to make an offer.

''Everybody has to look at ABN right now -- you need to. There remain a lot of obstacles to overcome (before an offer can be made),'' the source said.

The Sunday Telegraph, citing no sources, had said Santander would get ABN's European retail operations and South American businesses, while RBS would acquire ABN's U.S. retail bank LaSalle and its wholesale banking operations.

The source also said the talks were not exclusive and the two possible suitors could find alternative parties to bid with.

Bankers have said several banks are talking to each other about possible break-up counterbids for ABN -- seen by some to generate more value for shareholders.

The Dutch regulator confirmed on Tuesday it would not in principle oppose a rival bid for ABN, even if it means splitting the company. But the complexity of a carve-up could present a significant hurdle.

Other obstacles for potential counterbidders include the rise in ABN's share price -- up over 24 percent since the day before Barclays acknowleged talks -- and the desire to gain access to the bank's books, so far granted only to Barclays.

Santander and RBS declined to comment on Tuesday.

RIVAL SUITORS A move by rival suitors is not expected before Barclays shows its hand, with its offer seen as early as next week. A joint Santander-RBS bid would rely on bigger overlaps to extract more costs and offer a higher price.

''(RBS and Santander) have to be looking at it, it's too big a deal and they're too ambitious not to be interested,'' said a Madrid-based trader. ''Both banks have an obsession with size.'' The Spanish bank is already the dominant banking group in the euro zone after its 2004 purchase of Britain's Abbey, but Italy, where ABN has interests, has so far eluded its clutches.

RBS and Santander had a 16-year alliance which they formally dissolved in 2005. Over the years, the two banks helped each other on key deals while concentrating on their natural markets,SCH in Latin America, RBS in the English-speaking world.

Analysts said RBS, long seen as a potential rival in the race for ABN, could also bid alone, later selling off some assets, or strike a deal to buy just LaSalle, to boost its retail presence in the U.S., where it already owns Citizens.

''I would be surprised if there wasn't a bid from RBS in some shape or form,'' analyst Mike Trippitt at Oriel Securities said.

''But if the nugget that interests RBS is LaSalle, why doesn't it just approach Barclays directly? I would have thought that would be a neater solution, as opposed to a carve-up.'' At 1210 GMT on Tuesday, shares in ABN were up 2.1 percent at 33.9 euros. Shares in Barclays were up 0.3 percent, with RBS up 0.6 percent and Santander virtually flat on the day. The DJ Stoxx index of European bank stocks was up 0.7 percent.

Talk of an RBS/Santander bid also revived speculation over the future of Italian bank Capitalia, in which ABN has an 8.6 percent stake, lifting it 2.5 percent.

REUTERS PV ND1925