After a turbulent few months, AMP is planning a $1.2 billion rights issue to help bolster its Australian operations before it splits from its troubled British business.

The Australian Financial Review says the capital raising will be used to place AMP in a stronger market position in the event of a takeover bid, and pay back the holders of reset preference shares.

The paper said it understands the issue will take place in November and that the group is holding talks with British regulators about its post-demerger capital structure. It has also engaged three investment banks Macquarie, Deutsche and UBS to put the “finishing touches on the proposal”.

NAB sought to accumulate an 11% stake in AMP last month but secured only 5.4%. Although further takeover speculation was met with sceptical responses from investors, analysts forecast that if AMP joined NAB it would become Australia’s largest bank, well exceeding the size of Commonwealth Bank's Colonial First State and other consolidated companies.