Virgin Money set to table a bid for Co-op Bank, as CYBG and private equity firms also eye the troubled challenger

Hayley Kirton
Follow Hayley
The Co-op Bank Puts Itself Up For Sale
The challenger bank announced it was putting itself up for sale in February (Source: Getty)

Virgin Money is among the names thought to be putting in an offer for struggling Co-op Bank as it is due to close its first round of bidding later this month.

Co-op Bank announced in February it was putting itself up for sale. Up until this point, it had embarked on an ambitious turnaround plan, after a £1.5bn hole was found in its accounts back in 2013.

The bank blamed outside factors like the lower-for-longer interest rate environment for hampering its plans to raise capital organically.

Read more: Co-op Bank crosses fingers rescue plans will take shape

Now, the Mail on Sunday has reported Virgin Money is expected to table a bid, while Clydesdale and Yorkshire Banking Group (CYBG) is also interested in the challenger. Meanwhile, the Sunday Times reported private equity firms Cerberus and JC Flowers are also circling the bank.

Virgin Money snapped up Northern Rock in the aftermath of the financial crisis. Chief executive Jayne-Anne Gadhia told City A.M. earlier this year that the Brexit vote forced the lender to shelve a deal which would have seen it entering small business banking.

Meanwhile, CYBG was one of the banks interested in buying Williams & Glyn from RBS before that deal was put to bed.

Read more: Bank of England steps up to push along Co-op Bank rescue plans

Virgin Money, CYBG, Cerberus and JC Flowers all declined to comment.

Other banks have already stated they have little interest in being Co-op Bank's new owner, including Secure Trust Bank and TSB owner Sabadell. Banking sector sources have also told City A.M. previously the costly hole in the pension scheme they would likely be asked to plug is a significant factor scaring them away from making a bid.

Other lenders, such as OneSavingsBank, have also told City A.M. recently they might be interested in buying some of Co-op Bank's books, but are less interested in buying the lender as a whole.

Read more: Co-op Bank blames poor performance on decision to sell

Should Co-op Bank be unable to find a suitable buyer, it might have to turn to investors to fill a capital void worth around £750m.

Meanwhile, reports last month suggested the Bank of England is becoming impatient with the state of affairs and has engaged outside advisers to draw up further contingency plans for the bank. If there is no hope on the horizon, these could extend to triggering the process of winding up the lender.

Related articles