TPG Capital, the US private equity group, has dropped out of the bid process for Paragon, the troubled buy-to-let lender, just weeks after it pulled out of a £179m rescue of Bradford & Bingley, the UK's biggest lender to property landlords.

It is understood that the private equity group decided that Paragon did not "stack up" as a prospective investment and so has not proceeded to the due diligence phase for the UK's third biggest buy-to-let lender.