Shares in Northern Rock slid more than 20 per cent this morning despite the lender, once Britain's fifth-largest mortgage bank, confirming that it had gone into fresh takeover talks.

Virgin Money, among the leading contenders, said in a radio interview at the weekend that the stricken mortgage bank's brand was "dead", the management team was tainted and that there were no guarantees on jobs if it became the new owner.

Alex Potter, banks analyst at Collins Stewart, said in a note to clients this morning: "We continue to believe Northern Rock has little future as an independent entity but feel that rational bidders will be unlikely to pay more than 200p for the bank.

"We reiterate our 130p standalone price target, 190p takeout valuation and 'sell' recommendation."

Rock shares lost more than 20 per cent at one point, but rallied to be 56p in early trades at 217p.

Virgin, which emerged last week as a consortium bidder for the Rock, plans to rebrand the Rock as Virgin Money. Late last week, it said it had tabled a preliminary proposal with the bank.

Northern Rock effectively confirmed this morning that it had gone into talks with Sir Richard Branson's mobile phone to airline group, heading a consortium which includes AIG, the US insurer, Toscafund, the hedge fund, and Wilbur Ross, the legendary corporate raider.

Without naming Virgin, Northern Rock said that it "is working with a number of potentially interested parties regarding proposal's for a variety of potential transactions".

The lender said it was also "developing further options to explore with new parties as part of its review of all strategic options".

This suggests that takeover talks are continuing with JC Flowers, the private equity group, and other buyers thought to include Cerberus, the hedge fund, and Apollo, another venture capitalist.

Jayne-Anne Gadhia, head of Virgin Money, promised to reinvent Northern Rock and install a new team to replace Matt Ridley, the chairman, and current chief executive Adam Applegarth.

Ms Gadhia told the BBC in a radio interview at the weekend that Northern Rock would remain headquartered in Newcastle and she would try to safeguard as many jobs as possible. But she admitted: "There can be no guarantees."

The assault by the Virgin Money chief comes as Mr Ridley and Mr Applegarth face a grilling tomorrow when they appear before the powerful Treasury Select Committee of MPs.

The committee, chaired by John McFall, has already savaged Mervyn King, the Governor of the Bank of England, Hector Sants, chief executive of the Financial Services Authority, and the regulator's chairman Callum McCarthy.

The Virgin consortium is currently lining up its proposed chairman for a combined group.

It is thought that James Crosby, the former chief executive of HBOS, the Halifax owner, is on a short list alongside Peter Ellwood, former chief executive of Lloyds TSB. It is thought Sir Brian Pitman, former Lloyds TSB chairman, has also been courted.

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