Northern Rock's advisers are in talks with buyout firm JC Flowers over a rescue bid and US firm Cerberus is also interested, sources said today.
News that at least two potential bidders remain interested gave Northern Rock's battered shares a boost, lifting them over 14 per cent at one stage.
JC Flowers has secured more than £15 billion (€21.6 billion) in funding that could be used in a takeover, a source close to the matter said. Flowers, founded by former Goldman Sachs banker Chris Flowers, was doing due diligence work --a process set to take "weeks" - and funding was contingent on that, the source said.
Flowers did not aim to break up the mortgage lender, but he was keen to move quickly to prevent further damage to Northern Rock's brand and business.
"The objective here is not break-up, more to keep the thing together and make it work," the source said.
Cerberus also remains interested, another source close to the situation said.
Northern Rock, Britain's fifth-largest mortgage lender, has been engulfed by a crisis since it was offered emergency funds by the Bank of England last month.
By 8.30am Northern Rock shares were up 10.6 per cent at 150 pence - well above its record low of 112p on Tuesday but still down 87 per cent this year. The shares hit 154.9p in the session, valuing the bank at about £630 million.
"The business is almost certainly going to be taken out or split into parts, so ultimately the question is what price is it worth," said James Hamilton, analyst at Numis.
"The best price for equity shareholders will arrive if there are multiple people interested in acquiring it. I suspect that as the general quality of the assets is pretty good there will be competing bids for various parts of the group, if not for all of it," he added.