Royal Bank of Scotland shares rose sharply on speculation last week that HSBC Holdings PLC may try to buy the Scottish Bank.

Spokeswomen from both banks declined to comment on the speculation, which was fueled by a Financial Times stock-market report.

The newspaper said Friday that a surge in HSBC's share price increased the likelihood the bank would make a large acquisition. A natural target, it said, would be Royal Bank, the worst-performing U.K. bank stock in 1996 and so far in 1997.

"It's the old HSBC's-going-to-buy-it rumor," said Ian Poulter, an analyst with Williams de Broe. "We've heard that one year after year, but whether HSBC would care to pay goodwill at the current share price is another matter."

Royal Bank is seen as an attractive target because it has three basic units-U.K. banking, the Direct Line telephone car insurance business, and Citizens Financial Group in New England-that do not rely on each other. That means the company could be broken up and some businesses sold to offset the cost of the acquisition.

But HSBC, Britain's largest bank, has said its priorities are organic growth in Asia, where its Hongkong and Shanghai Banking Corp. unit has a strong business; and acquisition in Latin America, where it has made several purchases this year.

The bank has shown a preference for paying low prices for banks in trouble and then turning them around. In the past year HSBC has paid about 1.5 to 1.6 times book value for Banco Bamerindus do Brasil and First Federal Savings and Loans of Rochester.

Mr. Poulter said Royal Bank of Scotland would cost 2.7 times book value at its current share price.

Hongkong and Shanghai Bank tried to take over Royal Bank in 1981, but the British government stopped the transaction, citing the would-be buyer's international orientation.

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