Australia's NAB yet to decide on St George bid

MELBOURNE (Reuters) - National Australia Bank Ltd (NAB.AX), the country's top lender by assets, said on Tuesday it was watching takeover target St George Bank SGB.AX, but had not decided yet whether to make a bid.

Last week, Westpac Banking Corp Ltd (WBC.AX) made a $17.6 billion ($16.8 billion) agreed bid for smaller rival St George, just months after CEO Gail Kelly joined Westpac after heading up St George for nearly six years.

The two banks are in a two-week exclusivity period to conduct due diligence and St George is not allowed to approach any potential rival bidders during that period. Its board has backed the Westpac offer.

NAB Chief Executive John Stewart said on Tuesday his bank was looking at the St George business.

"We're having a look at how St George might fit with NAB but we haven't made any decisions either way, either to walk past it or to get involved," Stewart said after a speech in Melbourne.

"We have to try to assess what the opportunities would be for synergies -- so that's cost synergies and revenue synergies. Because it's only by doing that can you work out whether or not, or what price you could put a bid in," he said.

A copy of his remarks was provided to Reuters by NAB.

Analysts say NAB is the most likely potential rival suitor for St George among the large Australian banks, although Westpac has a distinct advantage with Kelly's knowledge of the St George business.

St George shares rose 0.5 percent to A$33.67 by 0545 GMT, while the four major banks were all weaker.

Westpac said at the weekend it reserved the right to raise its offer for St George if circumstances changed.

Westpac offered 1.31 of its own shares for every St George share, a premium of 24 percent, in what would be the country's largest banking takeover.

The offer on May 13 came just days after St George trimmed its earnings forecast, hit by soaring funding costs in the debt markets. Westpac said the combined bank would have cheaper access to funding and generate savings.

The combined entity would have a market capitalisation of around A$66 billion, overtaking Commonwealth Bank of Australia's (CBA.AX) A$61 billion. It would rank second to NAB by asset value.

Australian banks have mostly dodged the subprime credit woes that have ravaged global banks, although several have exposure to some troubled local firms.

($1=A$1.05)

(Reporting by Victoria Thieberger; editing by Jonathan Standing)