Royal Bank of Scotland's prized American division Citizens is reported to be a £10bn target for one of Brazil's biggest banks.
The Rhode Island-based retail bank, which was built up by former RBS chief executive Fred Goodwin and now has more than 1,500 branches across 12 states, is attracting plenty of bid interest, including from Brazil's Itau Unibanco.
With a rumoured price tag of £10bn, cash raised from any sale could be used by RBS - the parent bank of Ulster Bank - to buy back part of the Government's 80% stake in the bank, realising a windfall for British taxpayers, the Sunday Times said.
Itau, which has a market value of about £45bn on the back of explosive growth in the Brazilian economy, is keen to buy a deposit-taking bank in America in order to diversify its funding base and grow its reputation overseas.
RBS chief executive, Stephen Hester, called recent bid talk on Citizens "inaccurate", although yesterday's report said it was an open secret that RBS has no intention of holding on to the bank over the longer term.
While its current plan is to force through a restructuring to boost profitability and sell it in about three years, Itau and Canada's TD Bank are reportedly mulling whether to pull the trigger sooner. Bank of America Merrill Lynch and JP Morgan Chase would both be expected to show interest in Citizens, along with other foreign banks.
Although home to some of the world's biggest banking groups, America's domestic retail market is fragmented with hundreds of small regional lenders. Citizens has strong positions in the rich states of America's north-east.
RBS posted losses of £1.5bn for the first six months of the year on Friday, but surprised analysts with the pace at which it is running off the problem loans built up during Mr Goodwin's reign.
On Friday, it was revealed that a total of £28m has been set aside by Ulster Bank for costs arising from computer failings which left many customers in financial difficulties.
Payments were not processed properly because of the technical glitch across RBS group, but Ulster Bank customers were particularly hard hit.
The bank has promised to compensate those who lost out.