LONDON (Reuters) - Chancellor George Osborne will use a major speech on Wednesday to announce plans to auction off state-owned bank Northern Rock, the Sunday Times newspaper reported.
The newspaper said that Osborne would make the announcement at his annual Mansion House address to the City of London's financial elite -- a gathering that will also be addressed by Bank of England Governor Mervyn King.
A Treasury spokesman declined to comment on the report, beyond confirming that Osborne's speech would refer to financial services and banking issues.
Northern Rock was nationalised three years ago after becoming the first major British bank in more than 150 years to suffer a bank run, and Deutsche Bank has been advising the government on how to return it to the private sector.
An auction means Northern Rock is unlikely to become a customer-owned mutual -- a solution favoured by some legislators -- unless the highest bid is from one of Britain's relatively small mutually-owned building societies.
Yorkshire Building Society and Coventry Building Society have expressed interest in recent months, as well as Virgin Money, a privately held company backed by entrepreneur Richard Branson.
The Sunday Times also said Osborne would use his Mansion House speech to say that value for money for taxpayers -- as well as increasing competition -- would be the guiding principle behind the sale of government stakes in Royal Bank of Scotland and Lloyds Banking Group.
The finance ministry has to balance improving competition in the country's concentrated retail banking market against recouping the billions of pounds ploughed into Lloyds and RBS during the financial crisis.
Lloyds is already disposing more than 600 branches to meet European Union competition rules, and in a separate report the Sunday Telegraph newspaper said Osborne was urging the Independent Commission on Banking to reveal how many branch sales on top of this it would recommend in its September report.
(Reporting by David Milliken; Editing by Hans Peters)