It has itself been on the receiving end of takeover interest, although talks about a sale to Cerberus Capital Management, an often controversial investor, broke down last December.Ī merger with TSB would almost certainly make a medium-term exit for both Sabadell and the Co-operative Bank's owners easier to execute, potentially through a public share sale. The Co-operative Bank's ability to propose a transaction of this scale underlines its recent recovery, having announced an underlying profit of nearly £13m for the first half of 2021. It comes just weeks after TSB confirmed the appointment of Nick Prettejohn, a City veteran, as its new chairman. News of the Co-operative Bank's unsolicited approach to Sabadell is likely to trigger interest from other suitors for TSB, which operates nearly 300 branches. The odds on a short-term deal diminished in the spring, however, when Sabadell indicated that it would delay an auction process. TSB's future has been the subject of intense speculation since last year when its Spanish owner signalled that it would be open to a sale. The incident came three years after Sabadell bought TSB from public investors and Lloyds Banking Group, its former parent. TSB, meanwhile, was plunged into a storm of its own the following year when an IT systems calamity left millions of customers locked out of their accounts for days. The ensuing eight years brought further turbulence for both the Co-operative Bank and TSB, however, with the former reliant on another bailout by investors in 2017. Its former chairman, Paul Flowers, was left humiliated by tabloid revelations about his private life that led to him being dubbed 'the crystal methodist', and prompted an overhaul of its leadership and ownership structure. The Co-operative Bank, which at the time was majority-owned by the Co-op Group, one of the UK's biggest mutuals, was forced to turn to a group of American hedge funds in a £1.5bn rescue deal. In 2013, the Co-operative Bank's bid to acquire the branch network which became TSB was left in ruins when the scale of its own financial crisis emerged. If the Co-operative Bank did succeed with a formal bid for TSB, it would be a deal laden with corporate irony. This week, a takeover of Sainsbury's Bank by Centerbridge Partners, the US-based investor, fell apart after the supermarket group concluded that it would not deliver value to shareholders. Analysts have for years forecast a wave of corporate activity that would see mid-sized banks bulk up, although the combination of OneSavings Bank with Charter Court Financial Services and Virgin Money's tie-up with CYBG have proved to be exceptions.
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