THE Yorkshire Building Society could bid for Northern Rock, its chief executive confirmed for the first time yesterday.

Iain Cornish, who heads up the UK's second largest building society with 2.6m members, also put the case for why he believed the Newcastle based lender should be run as a mutual.

It comes just a month after its nearest rival, the Coventry Building Society, the country's third largest mutual, publicly expressed an interest in buying Northern Rock.

Although selling the nationalised lender to a mutual would not necessarily attract the highest bid it might appeal to the Government by reducing the risk and potential embarrassment of Northern Rock failing a second time if its new owners had to hit shareholder targets.

Deutsche Bank, which was appointed by Northern Rock in March is presently examining options, which could include a sale, mutualisation or a stock market flotation of the good bank, following its split from bad bank NRAM last year.

Mr Cornish said: "We are not about to make an offer but we would be interested.

"We would be one of a number of credible bidders within the building society sector.

"We think we have the skills to take on an undertaking of this scale and the track record of being able to run an organisation of that size."

Prior to the two mutuals interest Virgin Money and former Rock chief executive Gary Hoffman's NBNK Investments had been seen as likely frontrunners.

While the asking price for Northern Rock is likely to be in the region of £1.4bn the Yorkshire has assets of more than £30bn.

Mr Cornish said: "People say mutualisation wouldn't get the best price for the taxpayer but if you sell it to the highest bidder they would be under immense pressure from their shareholders and the risk is you sell it to someone forced to behave in the same way Northern Rock did in its wildest days.

"If you pay a high amount of money you have to get a return on that money, the right thing would be to take a long term perspective."

The Yorkshire also has a track record of being able to handle mergers, undertaking two in the past year firstly with the Chelsea Building Society and last month reaching agreement with the Norwich & Peterborough Building Society (N&P), the country's ninth largest mutual with 46 branches.

That deal was partly to extend its reach in eastern England, where it had two branches and at present it has five in the North-East, compared to Northern Rocks 21 of its 74 branches.

Northern Rock is now similar in stature and product offering to a traditional building society and the previous examples of mutuals transforming to shareholder driven banks, are less than encouraging. Northern Rock, Halifax, which became HBOS, and Bradford and Bingley all required Government bailouts while the Alliance and Leicester was in serious jeopardy before being bought by Santander. Mr Cornish said: "Some have had a spectacular fall from grace and I think you could argue that, had they never deserted their building society roots, while I am sure there would have been a crisis it could have been a lot less severe."

He added that research showed the public had a greater level of trust for building societies.

The Yorkshire, as in previous mergers, would retain the Northern Rock brand, with which local people had an affinity.

"We are obviously into speculation but that has been our strategy with previous mergers," Mr Cornish said.

The Yorkshire, employing 2,900 staff, recorded profits of £128.5m last year.

A Northern Rock spokesman said all options remained open and "value for the taxpayer will be key."