Is the Co-op Bank heading for a merger?

Boss admits stockmarket listing is some way off as losses likely to continue for two years

Paul Flowers
(Image credit: Andrew Yates/AFP/Getty Images)

The Co-operative Bank may soon join the wave of consolidation among so-called 'challenger' banks after its chief executive admitted it was likely to make losses for a further two years and was some way away from being ready for a stockmarket listing.Results published on Thursday showed the bank's losses nearly trebled from £77m to £204m in the first six months of the year. That was slightly better than expected, the Daily Telegraph reports, but the struggle to turn a profit underlines "the depth of the crisis at the ethically focused high-street lender".The group is rebuilding itself after nearly collapsing in 2012 amid allegations of serious mismanagement. The BBC notes that the banking division contributed £2.1bn of Co-operative Group's record losses of £2.3bn in 2013.The bank was rescued in a refinancing under which hedge funds took an 80 per cent stake in the business. According to Reuters these investors had planned a quick listing to generate a return, but this was put on hold when "it required a further 400 million capital injection".Chief executive Niall Booker has now kicked the prospect further into the long grass after he told reporters the bank was unlikely to pursue a float until its turnaround is "further advanced" and it is "closer to profitability". But losses will continue both this year and next, he added.Instead the bank may follow in the footsteps of TSB, the brand spun out from Lloyds as a standalone company after a sale to the Co-op fell through, and merge with a rival to create a larger player. Booker had raised that possibility in an interview with the Financial Times earlier this year and reiterated it in the wake of the latest results.

Now that its troubles are receding, Co-op may attract interest from rival groups. The BBC's business editor Kamal Ahmed notes that the bank has improved its capital position by selling off higher-risk loans, raising its interest rate margins (the difference between the rate it charges on loans and gives away to account holders) and stemming the outflow of customers from 60,000 in the first half of last year to closer to 2,000.

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