Capita Circles Taxpayer-Owned Mortgage Unit

The outsourcing giant Capita (LSE: CPI.L - news) is vying with an Australian-owned company to acquire a taxpayer-owned business salvaged from the wreckage of Britain's financial crisis.

Sky News understands that Capita and HML, a division of Computershare, have tabled offers to acquire the mortgage servicing division of UK Asset Resolution (UKAR).

Insiders said on Friday that an auction of the unit, which administers billions of pounds of mortgages and oversees the Government's Help To Buy scheme, is poised to move into its next phase in the coming weeks.

The price that the business will fetch is unclear, although both Capita and HML are understood to have expressed "serious interest" in acquiring it.

The sale is running alongside a larger one relating to Granite, a £13bn securitisation vehicle established by Northern Rock in 2001.

Both processes were launched by the Chancellor, George Osborne, in his last Budget before the General Election

Richard Banks, UKAR's chief executive, said at the time:

"The potential to accelerate the repayment of government loans has been made possible by the positive market conditions.

We have also demonstrated that our mortgage servicing capabilities are successful in delivering value and it is appropriate to consider the best way of leveraging the infrastructure and skills which we have created over the last four and a half years to enable us to continue to serve NRAM [Northern Rock Asset Management] and B&B [Bradford & Bingley] customers."

Sky News revealed last month that a unit of Goldman Sachs (NYSE: GS-PB - news) , the Wall Street investment bank, has formed a consortium to bid for the Granite portfolio.

Goldman, which is working with Blackstone (NYSE: BX - news) , Och-Ziff and TPG (Taiwan OTC: 6521.TWO - news) , has also recently been appointed as privatisation adviser to the Government as it accelerates the sale of its remaining shareholdings in Lloyds Banking Group and Royal Bank of Scotland (LSE: RBS.L - news) (RBS).

RBS is also bidding for Granite and may be interested in buying the mortgage servicing business that UKAR has put up for sale, sources said.

If RBS succeeds with its bid, it would be the first significant acquisition made by the lender since it was bailed out with £45.5bn of taxpayers' money more than six years ago.

The bank has been examining an offer for Granite in an attempt to deploy some of the surplus liquidity on its balance sheet.

Under the terms of its rescue by the Treasury in 2008 and amended by the European Commission last year, RBS is restricted from making acquisitions where they involve a price above a certain threshold until it completes the sale of hundreds of branches being rebranded as Williams & Glyn.

Previous disposals of assets held by UKAR, including a deal with JP Morgan last year, generated a profit for the Exchequer by some measures.

Capita, HML and UKAR all declined to comment on the process.