Virgin Money bids for Northern Rock

A source close to the Virgin camp said: “We have submitted a second round bid.”

Its second-round bid contains more details on its plans for the nationalised lender, although sources declined to comment on the price which Virgin was considering for Northern Rock.

The bid follows the lifting of the ban on Gary Hoffman from entering a bid, the chief executive officer of NBNK and ex-chief executive officer of Northern Rock.

NBNK is expected to make an offer contingent on being successful in its offer for the 632 Lloyds Banking Group branches.

It is thought that NBNK will combine the Lloyds branches and the Northern Rock branches together to achieve a 6% market share that the Independent Commission on Banking highlighted as creating a strong competitor to the existing players on the high street.

Competition for the Lloyds branches includes Co-Operative Financial Services and Sun Capital although NBNK has so far been the only one to submit a second-round bid.

Private equity firm JC Flowers has also been linked with Northern Rock, although it is thought that its interest in the nationalised bank has since waned.

Lea Karasavvas, managing director at London based Prolific Mortgage Finance, said: "Virgin could be the final piece of the jigsaw for Northern Rock. They have made giant strides to recovery over the last 18 months but what has been a struggle to overcome is the damage that was done to the brand.

"Virgin is all about brand and have lead the way in brand optimisation for a while. Northern Rock's ambition in their lending, their flexible underwriting and very expansive product range is proving very difficult for anyone to ignore, but the potential of Virgin getting involved would complete the Rock's ability to become one of "the" major players again.

"With arguable one of the worlds strongest brands behind them and a continual competitive product range, they could be one of the biggest lenders in the future, no doubt bringing a touch of innovation to the market."