All eyes on Co-op Bank following consolidation claims

Co-operative Bank in Manchester

The Manchester-based Co-op Bank could be poised for consolidation following reports it has hired City advisers PJT Partnership.

The adviser has been tasked with the role of identifying possible takeover targets, according to Sky News.

With the mid-sized banking sector predicted by analysts to be a potential hotbed of merger activity, PJT Partnership’s appointment could also cover advising on any financing requirements for possible deals by the bank, which was previously majority-owned by Manchester mutual The Co-op Group prior to its near collapse following financial problems and revelations regarding the private life of its then chairman, Paul Flowers.

He was forced to quit and an overhaul of the bank’s leadership and ownership ensued.

PJT was an adviser on the bank’s most recent restructuring, almost five years ago.

Chief executive, Nick Slape, said the bank was on the lookout for deals with other banks, last November, following the rejection of its £1bn takeover approach for TSB the previous month.

“We want to make sure we’re in the best position we can be to take advantage of opportunities should they arise,” he told the Reuters news agency.

“Scale is definitely an issue for the mid-tiers,” he said. “You can’t keep cutting costs … you need to turn your attention to diversifying the income line and growing the income line. That’s the rationale.”

Had the takeover been accepted, the two businesses would have boasted eight million customers.

It followed a previous approach for TSB’s branch network in 2013, which failed after the scale of Co-op Bank’s problems became apparent.

Last April the Co-op welcomed JC Flowers and Bain Capital Credit as new investors, with a 10% stake, when it reported results for its first quarter that showed a pre-tax profit of £7.2m and underlying profit of £2.6m for the three months to the end of March 2021.

Total income increased to £81.2m.

A Co-op Bank spokesperson declined to comment on the appointment of PJT Partnership, saying: “We are not providing commentary at this time.”

The bank is due to report its annual results tomorrow (February 24).