THE new banking venture led by former Northern Rock chief executive Gary Hoffman is understood to have put in a bid for his former company.

Takeover vehicle NBNK is challenging Richard Branson’s Virgin Money to buy Newcastle-based Northern Rock plc as the auction for the nationalised bank closes today ... four years after it was taken over by the Government. Hoffman left Northern Rock for NBNK last November, and as part of the terms of his departure he was prevented from making a bid for theState-owned bank until now.

NBNK, launched last year by Lord Levene to increase competition in the banking sector, will be a strong challenger to Branson, who had been seen as the frontrunner.

The other potential bidder is US equity house JC Flowers which is thought likely to drop out of the race.

NBNK is understood to have bid yesterday a day after Virgin Money submitted its second-round bid for Northern Rock. They are both thought to have bid between £800m and £1bn

Both NBNK and Virgin are believed to have pledged the Government that they will keep on Northern Rock’s 2,000-plus staff and the Northern Rock Foundation charity.

Although Virgin has indicated that it will do away with the Northern Rock brand and transform the bank’s Gosforth head office into the new headquarters of Virgin Money, which is currently based in Norwich.

Virgin Money currently employs around 460 staff in the UK, including 280 in Norwich, 100 in Edinburgh, and around 80 in London. The predominantly online business is looking to roll-out a high-street branch network with its first four branches planned for Norwich, London, Edinburgh and Manchester by the end of the year.

The company had originally targeted the launch of 70 UK branches by 2016, but could top this if it takes over Northern Rock’s 74-strong network, which includes 13 in the North East.

NBNK is also bidding for 630 bank branches that Lloyds has been ordered to dispose of by regulators as payback for being rescued by the UK Government during the credit crisis.