Abbey National has rejected a £10 billion Bank of Ireland merger offer.

Abbey, which has its regional head quarters in Bradford, said there was a "questionable strategic fit" between the two groups

Britain's second biggest mortgage bank said a merger between the two would cause "limited cost and uncertain revenue synergies".

Takeover target Abbey, which saw its share price soar 67p, amid rumours that it will join with BoI, but drop back 15p in early trading today, said: "In the board's view, Bank of Ireland's financial resources would bring little to a group of Abbey National's scale and complexity.

"Accordingly, the value creation proposition for Abbey National shareholders rests substantially on Abbey National's own recovery prospects, diluted by the disruption any such transaction would cause.

"Abbey added that the structure of the bid made it dependent on the BoI share price and this further underlines the uncertain value and inherent risk for Abbey National shareholders".

The Bank of Ireland said: "The complementary nature of both banks' activities in the areas of retail banking, wholesale banking and bancassurance provides a strong platform for the reinvigoration of Abbey National."

Yesterday, details of the Irish bank's proposals came to light. BoI offered Abbey shareholders 90 to 95 new BoI shares for every 100 Abbey shares, plus about 130p in cash for each Abbey share - bringing the cash element of the deal to £1.9 billion.

BoI said it had pinpointed £400 million of savings and revenue benefits from a merger. If the deal had gone ahead the head office of the combined group would be in Dublin. Mike Soden, BoI's chief executive, would have been in charge of the enlarged group.