After expanding in the United States for more than two decades, London- based National Westminster Bank PLC is preparing for a massive retreat.

Wall Street sources say Natwest has retained Goldman Sachs & Co. to help sell its U.S. commercial bank unit, National Westminster Bancorp. The asking price is said to approach $6 billion, which would rank the sale as one of the largest U.S. bank deals ever.

The parent company, observers say, is concerned that the $31 billion- asset unit will prove unable to keep pace with the new breed of megabanks now taking shape in the U.S.

"With the spate of bank mergers in the United States this year, it raises the question whether they still have the market share relative to their new competitors needed to compete," said David Raye, a bank analyst at the investment firm James Capel in London.

A representative of the New Jersey bank said Natwest would entertain offers but denied it had hung out a "for sale" sign.

Sources said, however, that Goldman already has made a "book," or acquisition offering, available to potential buyers.

The sources added that Natwest is seeking more than twice book value for the bank, which would place the price tag between $5 billion and $6 billion. Only one other deal has been larger than $6 billion - the pending $10 billion merger of Chase Manhattan Corp. and Chemical Banking Corp.

Natwest is also said to be seeking cash for the deal, which would severely limit the spectrum of possible buyers - unless the U.S. bank is sold in parts.

Possible buyers of the bank, sources said, include Bank of New York Co., NationsBank Corp., BankAmerica Corp., Citicorp, and foreign buyers like HSBC Holdings and ABN Amro Bank.

ABN Amro, however, is reportedly pondering a sale of European American Bank, its $6.5 billion-asset New York subsidiary, so some observers doubt it is a candidate to buy Natwest, which has 330 branches in New York and New Jersey.

Bank of New York is considered a top candidate, though a well-placed source denied marketplace rumors that the New York money center had already made a bid for Natwest.

For National Westminster, a sale would represent a sudden change of direction. The bank first entered the United States in 1970, and expanded through a series of acquisitions over the following two and a half decades. Just last year it paid top dollar for banks in New Jersey, which Natwest first entered in the mid-1980s.

Because Natwest paid so much for the New Jersey base, its cost base is high, added Denis Laplante of Fox-Pitt Kelton.

To keep up with new competitors like First Union Corp. and PNC Bank Corp., Natwest would need to spend more capital than the bank apparently is willing to expend, he said.

National Westminster could use the capital gained from a sale in areas like investment banking or asset management, Mr. Raye said.

If Natwest is sold, few buyers could stomach the billions of dollars in goodwill a cash transaction would generate, analysts said.

"You could very easily see the New Jersey operations sold separately from the New York operations," said Mr. Laplante.

A sale is not expected to include Natwest Markets, the London bank's U.S. investment banking subsidiary.

Observers were somewhat surprised at the Goldman Sachs selection. Although the firm is National Westminster's banker in the United Kingdom, Lehman Brothers has been its U.S. investment banker.

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