And the takeover of Mannesmann by the UK's Vodafone AirTouch suggests that takeovers could be two-way, with a few of the stronger UK banks attempting to move into Europe. The biggest threat to bank profits comes from the rapid expansion of financial services on the internet. Insurance giant Prudential has had a huge success in launching its internet savings bank, Egg, with one of the highest interest rates in the sector. Although many of the UK's traditional banks do permit customers to carry out some transactions online, they have not developed services to the same extent as their rivals. And the internet also puts pressure on costs, as consumers can shop around for the cheapest mortgage or savings rate more easily.
Branch closures Traditional banks also face a similar threat from telephone banking.
One reason why the Royal Bank of Scotland has succeeded in its bid for its larger rival, NatWest, is the success of its telephone insurance service, Direct Line. Costs of running internet and telephone banking are much lower than the cost of running thousands of fully staffed High Street branches. But the large banks face opposition from local customers and unions in their attempts to slim down and reduce the number of branches. The insatiable merger appetite Links to other Business stories are at the foot of the page.