HOPES were last night raised that crisis-hit North-East bank Northern Rock could survive as an independent group after reports that it has been offered a financial lifeline.

US bank Citigroup is understood to be prepared to lend the bank between £5bn and £10bn to help ease its funding crisis, according to Sunday newspapers.

The terms of the deal are still being worked out, but the funding would enable the troubled group to stop borrowing at the Bank of England's emergency rate, which is thought to be about seven per cent.

It would also put the country's fifth biggest mortgage lender on a more stable footing, enabling it to continue operating as an independent group, rather than being taken over.

Despite previous attempts to stabilise the bank, it is understood that, until now, no commercial lenders were prepared to deal with it. Citigroup was originally called in to work alongside Merrill Lynch, advising Northern Rock on a sale.

It emerged last week that New York-based private equity firm JC Flowers had raised £15bn to bid for the bank.

The firm's boss, Chris Flowers is understood to have gained funding commitments from JP Morgan, Credit Suisse and Wachovia.

The private equity chief, who specialises in takeovers of financial firms, is said to be keen to keep the Newcastle-based lender intact, unlike Cerberus, a rival private equity firm also rumoured to be interested in parts of the business.

US private equity firm Blackstone and its UK rival, Apax, are also rumoured to be looking at the bank.

Northern Rock's stock market value has tumbled to £700m since it was forced to seek emergency funding from the Bank of England.

Its shares have fallen from £12.48 in February, to 158.5p on Friday amid reports that a potential suitor would only be prepared to pay 190p a share.

That would value the group at about £800m, compared with a value of nearly £5bn in February.

The loan from Citigroup would not only save the bank from being sold "on the cheap", but it could also mean its board, including chief executive Adam Applegarth, remained in place.

Northern Rock suffered the first run on a UK bank in 150 years last month, as the company struggled with soaring borrowing costs in the money markets where the firm raises most of its cash for mortgage lending.