The Co-op Bank had revealed it was in talks with an unnamed potential buyer last month © Bloomberg

The Co-operative Bank has called off sale discussions with US private equity group Cerberus.

The UK lender revealed it was in talks with an unnamed potential buyer last month, which people briefed on the situation said was Cerberus. On Monday, however, it said the discussions had ended, without giving a reason.

One person close to the Co-op Bank stressed that the talks had been preliminary, and were disclosed earlier than would normally be the case due to regulatory requirements around an upcoming bond issuance.

The bank said it remained committed to its existing turnround strategy.

“Our priority is to support our personal and small business customers through the current period of economic uncertainty. We are making good progress as we deliver our strategy, having achieved some important milestones during 2020, and we are focused on returning to profitability and building a strong and successful Co-operative Bank,” said recently appointed chief executive Nick Slape.

The Co-op Bank has struggled for more than a decade, since its disastrous takeover of Britannia Building Society in 2009. Bondholders took control of the lender in a £700m rescue deal in 2017 after attempts to find an alternative buyer failed, and it has since been a perennial subject of M&A speculation.

The most recent talks were not the first time Cerberus has considered purchasing all or part of the Co-op Bank, according to two people briefed on its earlier efforts. The group previously considered buying the bank and breaking it up in partnership with CYBG, according to one person involved in the discussions. CYBG instead went on to merge with Virgin Money in 2018.

Low interest rates and a gloomy economic outlook have revived talk of the need for consolidation among the UK’s midsized banks, which have long struggled to break the dominance of the largest lenders — NatWest, Lloyds Bank, HSBC and Barclays.

Sabadell, the Spanish owner of TSB, said last month that it would consider “strategic alternatives” for the British unit after a proposed combination with Spanish rival BBVA fell through. One person familiar with the discussions said TSB had already received several expressions of interest from potential buyers.

Allied Irish Banks, Ireland’s largest lender, is also considering selling its UK business lending arm, after concluding that it did not have enough scale to effectively compete and earn strong returns in the market.

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