The City signalled yesterday it had cured itself of its recent phobia of big deals being done by Royal Bank of Scotland - adding £1.5bn to the Edinburgh-based institution's stock market worth on the back of its bid approach to Dutch bank ABN Amro.

This jump in market capitalisation resulted from the City marking up Royal's shares by 2.4%, or 48p, to £20.71.

Royal said late on Friday, after the London stock market closed for the weekend, that it had with long-time Spanish ally Santander and Belgian-Dutch insurer and bank Fortis, approached ABN Amro to request takeover talks and access to the Dutch company's books to put together a three-way break-up bid.

The trio is aiming to break up a merger being discussed by Royal's UK rival, Barclays, and ABN Amro.

Although Royal chief executive Sir Fred Goodwin has not put a foot wrong in integrating the transformational acquisitions of UK bank National Westminster and Charter One of the US, his charge's share price had been depressed for a spell by a view which had developed in the City that he should cool his heels on the deal front.

This arose partly from fears over Royal's purchase of a stake in Bank of China, a deal which so far looks shrewd.

Royal shares have climbed sharply of late - boosted by a stock buy-back last year and by a 25% hike in the 2006 dividend announced last month.

Shares in ABN Amro surged 6% to 35.58 yesterday on hopes of a bid battle, as the prospect of big deal action boosted European stock markets. This took them above the 35-a-share which analysts estimate might be Barclays' limit. Barclays' period of exclusivity in talks with ABN Amro runs out tomorrow.

The signs yesterday were that ABN Amro wanted more detail from the Royal consortium before agreeing to open its books or enter talks.

Crucial to developments is likely to be the attitude of ABN Amro shareholders, and whether they press the Dutch bank's board to speak with the break-up consortium.

Banking analysts believe the consortium could put a higher total value on ABN Amro because they can each take the parts of the business in which they are already strongest and thus secure greater benefit.

However, ABN Amro's talks with Barclays about merging to form a Netherlands-headquartered banking giant signal the Dutch bank's board would not be keen on a break-up bid.

Although the consortium is viewed as able to pay perhaps 40-a-share for the Dutch bank, ABN Amro investors could end up being offered shares in each of the three bidders by way of payment.

It is thought likely that, if Royal, Santander, and Fortis were to proceed with an offer and succeed, there could be a roughly equal split in terms of the value of the assets each would take.

ABN Amro now has a market worth of 68bn (£46bn). The roughly £15bn price implied by an equal split of the Dutch bank's current market value would represent Royal Bank's second-biggest acquisition yet after its £21bn purchase of National Westminster in 2000. And any bid for ABN Amro would still seem likely to be at a premium even to yesterday's elevated share price.

Royal had a stock market worth last night of £65.5bn.

It is likely that Royal would in any deal be looking to take ABN Amro's corporate banking operations, and the Dutch bank's activities in an Asian region in which the Edinburgh-based institution's global banking and markets division has been ramping up its presence. This heavyweight Royal division has been growing and recruiting rapidly in the likes of Hong Kong, Singapore, and Japan. Royal would also be by far the most likely taker among the trio for ABN Amro's US business, which includes LaSalle, given the Scottish bank's already large presence in America through subsidiary Citizens Financial.

Dutch-Belgian banking and insurance group Fortis would seem most likely to take ABN Amro's lowland European retail banking business and its asset management activities, as well as its upmarket private client banking business.

Spanish bank Santander, which helped fund Royal Bank's purchase of NatWest, would probably be interested in ABN Amro's operations in South America, including Brazil, and in the likes of Italy.

Mike Trippitt, banking analyst at Oriel Securities, said of yesterday's jump in Royal shares: "I think Royal Bank is out of the sin-bin and the market knows Fred (Goodwin) knows how to do a deal."

Highlighting the "breadth and depth" of Royal's acquisition experience, extending to its US and insurance businesses as well as at group executive level, Trippitt added: "I think the market finally acknowledges Royal Bank does know what it is doing when it comes to acquisitions."

Ralph Brook-Fox, at Royal shareholder Resolution Asset Management, said: "My take on it would be that people are just sort of pleased to see it (Royal) is in with a consortium, rather than trying to do anything dramatic on their own. Therefore, the hope would be, in the event of a deal, you wouldn't have the residual issue of having a significant tail of (non-core) disposals to sort out, and hopefully the bits of the businesses they would retain would be more cohesive with the group."

However, he added: "I think, to be honest, I would be slightly sceptical they can get the deal done in terms of, if it is a consortium proposal, why wouldn't the ABN Amro board go for a full-scale auction?"