British bank Abbey National said yesterday it had held talks with Lloyds TSB over a possible merger at the latter's request, but stressed its talks with Bank of Scotland announced last month were still making good progress.

An acquisition of Abbey National, Britain's second-largest home mortgage provider, would boost Lloyds to a leading position in the home loan market but it faces a tough battle with Bank of Scotland. Failure by the Scottish bank to snap up Abbey National would leave it vulnerable to hostile takeover bids itself, analysts warned.