Nationwide Building Society has walked away from the bidding for the 316 branches being re-auctioned by Royal Bank of Scotland.

Sir Richard Branson's Virgin Money and US private equity group JC Flowers are said to have submitted non-binding first-round bids, it was reported yesterday, but Nationwide is staying away. Its chief executive Graham Beale said last month he was weighing up a possible bid, but a spokesman con-firmed yesterday: "We haven't bid, we will continue to pursue growth in the SME and current account market organically."

Bidders are yet to find out whether RBS, 82% owned by the taxpayer, will select a preferred bidder from the initial offers, or draw up a shortlist for second-round bids. UK private equity firm AnaCap is also reportedly interested in the sale, pos-sibly in a joint venture with Blackstone, while Corsair Capital has been touted as another possible private equity bidder.

The branches were almost sold to Santander in a £1.65 billion deal that collapsed when the Spanish bank pulled out un- expectedly in mid-October, prompting speculation RBS will have to lower the price significantly.

RBS has to dispose of the branches by 2014 as a condition of its £45.5bn taxpayer bailout. The outlets on offer have 1.8 million customers and generated about 10% of RBS's group operating profit in the first half of 2012.

It was reported last month that the Treasury was working on a back-up plan that would see the network rebranded as Williams & Glyns and converted into a small business lender.

Virgin Money entered the mainstream UK banking market when it picked up Northern Rock in November 2011 for £747m and has rebranded 75 branches. As soon as the Santander deal collapsed, Virgin sources were confirming it was ready to begin due diligence, but they also flagged that the branches' IT systems could be an issue.

Santander blamed the technical problems of transferring 1.8 million customers' accounts for its withdrawal. A deal with Sir Richard would take the Virgin branch network from 75 to nearly 400.