Virgin Money is set to cool its interest in the 630 Lloyds Banking Group branches for sale and will instead focus its intention on Northern Rock.
Virgin chief Sir Richard Branson had seen the LBG branches as a way of gaining a way to gain a significant foothold in the UK retail banking sector.
But, according to the Financial Times, Branson has been put off due to stringent capital requirements, high funding costs and an unfavourable mix of assets on offer. The report states Branson has not made a formal bid for the branches and is now focussed on acquiring state-backed bank Northern Rock.
Reports state Lloyds is in talks with six interested parties, including NBNK, the Co-operative Group, Virgin, National Australia Bank and Resolution founder Clive Cowdery. However, it is thought only NBNK and the Co-op have made formal bids.
LBG is being forced to sell the branches by the European Commission as part of the agreement surrounding its bail-out.
First round bids for Northern Rock are due this week.