NATIONALISED Northern Rock was split into two today as the race to take over the good part of the bank stepped up a gear.

The state-owned lender spun off a savings and mortgage bank called Northern Rock plc on January 1 - effectively the good bank that will be sold off into the private sector.

Its more toxic loans have been retained in the existing bank, renamed Northern Rock Asset Management, which will remain in public ownership.

Suitors are reportedly lining up to take over the good bank as the Government is expected to kick start the sale process soon.

Virgin Money, headed by chief executive Jayne-Anne Gadhia, is widely seen as a front runner having launched a failed bid for Northern Rock before it fell into public hands.

National Australia Bank, which owns Clydesdale and Yorkshire banks in the UK, was also reported at the weekend to be considering entering the fray.

It is said to be sounding out advisers over a possible bid.

Northern Rock remained tight-lipped on any sale process, saying only that it was at a very premature stage and that there was no set timetable for disposal.

Regulators are also keen for new entrants to the sector following the dramatic consolidation seen in the wake of the financial crisis.

Bidders for Northern Rock would land a company with about £19bn in retail savings and some £10bn in residential mortgages.

It is taking on new business and said it was benefiting from a strong capital and liquidity position following the banks split.

The Asset Management arm, which has about £50bn in mortgages and a £4.5bn portfolio of unsecured loan accounts, will not be taking on new business.

Northern Rock stressed today that about 90 per cent of its 450,000 mortgage accounts were not in arrears.

Gary Hoffman, chief executive of Northern Rock plc, said: "I am pleased to announce that we have successfully completed the legal and capital restructure of the business.

"This helps to build a stronger future and delivers value to taxpayers."