Private equity and trade buyers are once again circling Kensington Mortgages, one of Britain's top specialist mortgage firms.

Following a recent profits warning and a slump in its share price, Kensington has asked its financial adviser Rothschild to examine its strategic options, including a potential sale of the firm, which is valued at 400m (E592m, $785m).

The move to consider a sale has alerted a number of potential bidders including private equity firms, investments banks and retail banks keen to expand in the high-margin sub-prime lending market.

Kensington offers mortgages to customers with poor credit records who find it difficult to obtain loans from High Street lenders.

High Street banks like HBOS, HSBC and Barclays, as well as specialist lenders Provident Financial and Paragon Mortgages are being tipped as potential buyers.

Earlier this year, private equity firm Permira was thought to be close to a 500m bid for Kensington but withdrew its interest because the firm's share price increased on the back of takeover speculation.

Lehman Brothers and Deutsche Bank were also rumoured to be considering a bid. A host of investment banks have increased their interest in the sub-prime lending sector. The specialist mortgage sector is estimated to be worth 35bn a year.

It is understood that management at Kensington do not see a sale of the firm as a foregone conclusion but, given the firm's recent problems and increasing competition in its sector, it would be open to one at the right price.

In November, shares in Kensington slumped by 11 percent to 805p after a profit warning.