Dutch bank ABN AMRO withdrew its recommendation of a takeover by Barclays, leaving it neutral between the British bank's offer and a higher bid from Royal Bank of Scotland's consortium.
The Netherlands' biggest bank, the target of a 66 billion-euro ($89.55 billion) offer from Barclays and a 71 billion-euro bid from RBS, Belgium's Fortis and Spain's Santander, also reported a 7.1 percent decline in its second-quarter net profit on Monday.
ABN originally backed Barclays when announcing their merger deal in April but withdrew its recommendation even after Barclays sweetened its offer last week to include more cash.
Barclays said it will continue with its bid. It said it had waived a pre-condition of its offer that ABN's boards recommend it, and instead made a recommendation a condition to the completion of an offer.
ABN's shares were up 0.3 percent at 35 euros at 0710 GMT, when Barclays was down 0.4 percent at 679 pence and the DJ Stoxx European banking sector index was down 0.3 percent.
ABN's supervisory and managing boards said they were currently not in a position to recommend the offers from Barclays or the consortium.
ABN AMRO will further engage with both parties with the aim of continuing to ensure a level playing field and minimizing any of the uncertainties currently associated with the offers with a view to optimizing the attractive alternatives available to ABN AMRO's shareholders, ABN said in a statement.
The RBS-led offer, which would result in a break-up of ABN, is 93 percent in cash and adds up to 38.1 euros per ABN share at current market prices -- against Barclays' bid at 34.7 euros per share.
Barclays sweetened its offer with a cash portion, as China Development Bank and Singapore's Temasek took stakes in the bank, but its offer remains mostly in shares, and therefore vulnerable to recent market turbulence.
Barclays chief executive John Varley said in a statement he understood it was difficult for ABN to make a clear recommendation, but added: We are confident that our revised offer delivers the value, stakeholder benefits and certainty that will allow the boards to support a recommendation in due course.
RBS said it noted ABN's statement but had nothing to add.
SECOND-QUARTER PROFIT DOWN
ABN reported a net profit of 1.13 billion euros in the second quarter, down from 1.216 billion euros in the same period last year and compared with a 1 billion euros average forecast in a Reuters survey of five analysts.
The figures exclude discontinued operations and include a 208 million-euro gain on disposals.
On a per-share basis, ABN reported earnings of 0.61 euro per share, and 0.50 euros per share from continuing operations.
Operating profit rose 12.8 percent to 5.45 billion euros.
ABN said it was on track to reach its goal of posting earnings per share of 2.30 euros for 2007, adjusting for disposals.
The bank will be extremely challenged to reach the promised 2.30 euros earnings per share, Petercam analyst Ton Gietman said in a note.
ABN increased its interim dividend to 0.58 euros, up 5.5 percent.
(Additional reporting by Steve Slater in London)