VIRGIN Money is being tipped as a possible bidder for the 632 branches put up for sale by Lloyds Banking Group after receiving financial backing from a new group of investors.

The online bank has already expressed an interest in buying state-owned Northern Rock, but with funding now in place to back a larger deal, it is also said to be poised to enter a second-round bid for the Lloyds branches.

Virgin’s new backers include the Abu Dhabi Investment Authority, private equity group Carlyle, General Atlantic and the Universities Superannuation Scheme, all of which will take a minority stake in the online bank if it is successful in acquiring either Newcastle-based Northern Rock or the Lloyds branches, or both.

Lloyds received only three formal bids in the first round of the sale process – from the Co-operative Bank, AIM-listed shell company NBNK and entrepreneur Hugh Osmond’s Sun Capital.

The low level of interest reportedly stemmed from worries over a gap of between £20bn and £30bn between the assets and liabilities of the business up for sale. Lloyds has since indicated it will increase the asset base of the estate by £5bn over the next two years to help ease some of the concerns.