NBNK has made a fresh bid to take control of 632 Lloyds Banking Group branches and create a major new banking presence.

The offer is understood to be worth more than £1.5 billion and puts NBNK back in competition with The Co-operative Group.

The Co-op won the race to be named preferred bidder in the so called Project Verde sale, which includes 185 Lloyds TSB Scotland branches, in December last year.

It was supposed to have struck a deal before the end of March but the sale process has proved more complicated than both parties expected. Co-op chief Peter Marks said last month there was no certainty a deal would be reached.

Lloyds, which is being forced to sell the business by the European Commission as a condition of its 2008 state bailout, intends to float the branches on the stock market as a new retail bank if the Co-op deal falls through.

NBNK said it would offer Lloyds shareholders – including the UK taxpayer – the option of receiving cash directly or receiving shares in a new, listed banking group.

It has pledged to keep all the branches open, maintain staffing levels and avoid short-term incentive bonuses for senior managers.

Gary Hoffman, NBNK chief executive, said: "I believe we have tabled a compelling proposition that will invigorate competition, provide jobs and is the right solution for taxpayers.

"Over many years, the returns in UK retail banking have been much higher than group returns.

"If you can produce a pure UK retail play, with very good return on equity, without dilution coming from the rest of the group, then it is an attractive proposition for investors."

NBNK has not yet opened talks with Lloyds as Co-op remains the preferred bidder but Mr Hoffman is confident about raising the necessary funds for the bid from investors.

In a statement Lloyds said: "The group acknowledges receipt of a letter outlining an indicative revised proposal from NBNK.

"However, we continue to negotiate solely with the Co-operative Group and are continuing to prepare for a divestment through an initial public offering (IPO)."

Shore Capital analyst Gary Greenwood said: "It would make more sense to do a deal with the Co-op, but I don't think the Co-op can actually deliver."

NBNK did not comment on whether it may bid for Clydesdale Bank and Yorkshire Bank if it loses out on the Project Verde branches.