National Australia Bank (NAB) has held talks with Spain’s BBVA about creating a joint venture in Britain.

The two banking giants are among the frontrunners to buy a £1.5 billion network of 300 branches being sold by Royal Bank of Scotland.

NAB, which owns Clydesdale and Yorkshire banks in the UK, has approached BBVA with a plan for the two banks to work together on the deal.

A tie-up between them could then be used as a platform to acquire other British banks due to come up for sale over the next few months.

If agreement can be reached, the two companies would be pitched into a head-to-head battle for the RBS branches with Santander,the Spanish bank that has bought Abbey, Alliance & Leicester and parts of Bradford & Bingley.

Santander and BBVA are Spain’s two biggest banks, and fiercely competitive rivals. Santander sees the RBS business as the key element still missing from its British business, and is considered the favourite to secure the deal.

Sir Richard Branson’s Virgin Money has already dropped out of the bidding.

RBS is being forced to sell the branch network by the European Commission as a penalty for accepting billions of pounds in state aid at the height of the credit crunch.

The branch network is being sold along with the brand name Williams & Glyn’s, which was the name of RBS’s branch network in England prior to its acquisition of NatWest in 2000.

The commission has stipulated that accounts transferred as part of the sale must account for 5% of the UK’s small business banking market.

Although Santander is now one of Britain’s biggest mortgage lenders, it has a negligible presence in business banking.

Although Northern Rock and a vast part of Lloyds Banking Group’s business are both to be sold, Santander would be barred from buying either due to competition concerns in areas such as mortgages.