NAB scouting for small takeovers in Britain

National Australia Bank is looking into making offers to take over one or more building societies in Britain, The Observer newspaper reported.

Potential targets named by the newspaper include the Chelsea or Newcastle building societies. A third possibility is the Principality Building Society in Wales.

All three are finding trading conditions difficult thanks to the property price crash and the flow of deposits into bigger banks, some of them now government owned.

According to the newspaper, Chelsea Building Society is in talks with the Financial Services Authority over concerns about its liquidity following a £41 million bad-debt charge relating to mortgage fraud.

Newcastle Building Society is also believed to be talking to advisers at investment bank Lexicon about a possible debt swap that could boost its capital ratios.

Principality has incurred losses on sub-prime loans.

None of the building societies would add much scale to NAB's existing retail and business banking operations in Britain through Clydesdale Bank, but they may provide viable means to build distribution, deposits and customer lists.

Larger targets are also on the market, such as Northern Rock, nationalised early on in the financial crisis.