The Treasury is examining the possibility of selling Northern Rock in the autumn, which will be exactly two years after it was taken into public ownership caused by funding and liquidity difficulties due to the credit crunch.
The bank could be split into two businesses, with £19.5bn worth of retail deposits in one division and £66.7bn of mortgages in the other, according to reports. The Treasury would attempt to sell the businesses separately. The buyer of the mortgage section would have to take on Northern Rock's bad loans.
Other options being considered for the lender include floating it on the stock market or to remutualise it.
There is no rush to sell the state-owned bank. The nationalised bank is ahead on its repayments, owing the Government £8.8bn of the £27bn it was loaned at the end of 2007. It has also taken cost cutting measures including the axing of jobs.
The Government had always intended to sell the troubled bank back to the private sector. A sale this year at a reasonable price would exceed expectations.
It is understood that lenders such as Royal Bank of Scotland would not be allowed to place a bid for Northern Rock due to their existing share of Britain's mortgage market.
