Coop Bank puts itself on the market

The lender, which is still 20 per cent owned by the Co-operative Group and has four million customers, is inviting offers to buy all of its shares.

The bank is now 80 per cent owned by investors, including the American hedge funds Silver Point and Perry Capital.

Known for its ethical standpoint, chairman Dennis Holt, said: “Customers value the Co-operative Bank and our ethical brand is a point of difference that sets us apart in the market.

“While our plan has been impacted by lower for longer interest rates, the costs associated with the sheer scale of the transformation and the legacy issues we faced in 2013, there is considerable potential to build the bank’s retail franchise further using the strength of the brand, its reputation for strong customer service and distinctive ethical position.”

However, while it used to own 100 per cent of the bank, after several restructurings the Cooperative Group’s remaining 20 per cent share means it now has to decide whether to put up more cash or see its stake fall even lower.

Should this happen, the bank may not automatically be able to use the Co-op name.

In such an eventuality it would be for City watchdog the Financial Conduct Authority and the UK Business Secretary to decide whether customers were being misled about the bank’s true identity.

The Coop Bank has not been able to strengthen its finances since its rescue because of continuing low interest rates.

A spokesman for the Bank of England’s Prudential Regulation Authority said it welcomed the move.

The Co-op warned this month that its capital levels would be lower than hoped for a longer period of time, prompting speculation of intervention from the authorities.

The PRA, which ensures banks’ safey, said: “We will continue to assess the bank’s progress in building greater financial resilience over the coming months.”

From among potential buyers, the TSB has hinted that although it is focused on completing the separation of their IT systems from Lloyds, it would be interested if the price was right.