NATIONALISED lender Northern Rock yesterday began its first week after it was split in two, as speculation over potential buyers – including the owner of another regional bank – intensified.

The Newcastle-based lender officially separated into 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, now renamed Northern Rock Asset Management, which will remain in public ownership. It will hold £50bn of mortgages and £4.5bn of unsecured personal loans.

Speculation is now intensifying over possible suitors for Northern Rock plc, with the Government expected to start the sale process formally 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 Yorkshire Bank and Clydesdale Bank in the UK, is also said to be considering entering the fray, with speculation suggesting it is sounding out advisors over a possible bid.

Northern Rock yesterday would not comment 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 take over 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 will not be taking on new business, although Northern Rock stressed yesterday that about 90 per cent of its 450,000 mortgage accounts were not in arrears.

Gary Hoffman, chief executive of Northern Rock plc and of Northern Rock Asset Management, 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.

“Our aim was to make this process as smooth as possible for all of our customers. They do not need to take any action and can continue to contact us in the usual ways.”

Nick Brown, Minister for the North-East, last night hailed the split as a fresh start for Northern Rock.

“This is an important milestone for Northern Rock and its staff. It signals a fresh start for the new, strengthened bank and is a major step towards an independent future,”

he said.

“From today, a healthy new Northern Rock will offer savings and mortgage products, increasing competition in the sector and providing consumers with more choice.”

A number of fledgling groups are looking to capitalise on the shake-up of the UK banking sector, with assets from Lloyds Banking Group and Royal Bank of Scotland also on the sale block.

The two contenders

VIRGIN MONEY

VIRGIN Money is the financial arm of Sir Richard Branson’s Virgin Group.

Established in March 1995, it was originally known as Virgin Direct, and pioneered index tracking by launching a value Personal Equity Plan into the market. In October last year, it applied to the Financial Services Authority for a full banking licence.

It has launched a bid for Northern Rock before, in October 2007, when Virgin emerged as the favoured bidder for the bank before it was taken into public ownership. Had it been successful, Virgin Money and Northern Rock would have merged into the Virgin Bank.

NATIONAL AUSTRALIA BANK

YORKSHIRE Bank owner National Australia Bank (NAB) is one of the largest financial institutions and banks in Australia in terms of market capitalisation and customers.

NAB, based in Melbourne, is ranked 17th largest bank in the world measured by market capitalisation, holding about $657bn (£366bn). It operates across ten countries, and has 1,714 branches and service centres and 2,939 ATMs.

It acquired Yorkshire Bank in 1990 for £1bn. The Yorkshire-based lender was established in Leeds in 1859 and has the majority of its branches in the county.