Virgin Money has walked away from a proposed takeover of the Cooperative Bank after months of speculation regarding a deal.
The Richard Branson-backed lender, which has a 3.4 per cent per cent of the mortgage market, informed the Co-op Bank it has ended discussions about a takeover in the past few days, Sky News reported.
Co-op is said to be negotiating with a number of hedge funds regarding a financial restructuring, including Blue Mountain Capital Management, Cyrus Capital Partners, GoldenTree Asset Management and Silver Point.
The Co-op Bank announced it would require between £700m and £750m of new capital in March through a combination of new equity and a debt-for-equity swap.
The bank has made £2.7bn of cumulative losses over the past five years, and in January it revealed its capital levels would fail to meet regulatory requirements in the coming years.
David Hollingworth, associate director of communications at London & Country Mortgages, said: “Something has to happen for the Co-op, but what shape that comes in is very uncertain.
“From a mortgage perspective, the Co-op is still participating in the market and has been pricing very well, and Virgin Money is an established brand.
“I don’t think you would be looking for consolidation, which we saw a lot of after the financial crisis. It is nice to have more options available.
“People were probably looking at the Co-op’s branches. There are some lenders keen to increase the number of branches they have, but at the same time banks are pegging back their branches.”
Virgin Money and the Co-operative Bank declined to comment on reports they were no longer in talks.
simon.allin@ft.com
