And then there were four in the great race to buy RBS branches

It is understood the bid by Wellcome Trust, the medical research charity, and Blackstone failed to compete with rivals. The branches are expected to fetch up to 2bn.

There are now four contenders left competing for the RBS branches which are being put up for sale by the part-nationalised bank in order to satisfy European competition concerns.

The bidders are BBVA and Santander, which bought Abbey and Alliance & Leicester in the UK, Sir Richard Branson's Virgin Money and National Australia Bank, the owner of Yorkshire and Clydesdale Banks.

UBS, the investment bank handling the RBS auction, is expected to draw up a final shortlist by the end of the week.

Wellcome was not immediately available for comment.

The organisation, which has an endowment of around 13bn and specialises in supporting medical research, emerged as a surprise suitor in the initial round of the bidding process earlier this month.

It was said to have seen the RBS network, which comes with the Williams & Glyn's brand name, as a long-term investment opportunity, having recently been involved in bank acquisitions in US and Bermuda.

However, its offer did not match up to those of its rivals, with bids believed to go as high as 2bn, according to reports.

The exit of Wellcome and Blackstone is seen as marking the end of private equity involvement in the bidding process, which would come as a blow to Government hopes for new players and more competition in the sector.

RBS may face investor questions about the sale process at its annual shareholder tomorrow.

NAB chief executive Cameron Clyne would not comment on reports earlier this month that the group is considering a possible flotation of its UK operations.