Co-op Bank sheds windfarms and PFI loans in fresh revamp

A portfolio of private finance initiative loans and windfarm assets is to be put up for sale by the Co-op Bank as top managers try to accelerate a turnaround of the struggling lender.

Sky News has learnt that the Co-op Bank is exploring an auction of a further chunk of the balance sheet of its non-core operations following a slew of disposals since it was plunged into crisis in 2013.

Insiders said on Monday that a formal sale had not yet got underway but was likely as Niall Booker prepares to hand over the reins as chief executive to Liam Coleman at the end of the year.

The Co-op Bank, which reported last week that its core operation had returned to the black in the first nine months of the year, has endured a torrid three years.

Its balance sheet ballooned following a disastrous merger with the Britannia Building Society, and then ran into trouble when it tried to buy more than 600 branches from Lloyds Banking Group (Other OTC: LLOBF - news) .

The Co-op Group continues to own a minority stake in the bank but was forced to surrender control when a £1.5bn capital-raising brought in a group of US hedge funds as shareholders in the lender.

During the summer, the mutual exercised its right to appoint a director to the board of the bank for the first time, raising the prospect of it playing a significant role in the resolution of the lender's future.

In September, the Group slashed the value of its bank stake by a quarter, implying that the entire financial services business is now worth just £725m.

The decision by the Co-op board underscored both wider banking industry uncertainty - reflected in the falling share prices of listed banks this year - and the particular circumstances of the Co-op Bank.

The portfolio of assets that the Co-op Bank is now looking to sell includes a package of commercial mortgages, according to sources close to the process.

A spokeswoman for the Bank declined to comment on the scale of the prospective sale, but sources said it was part of the ongoing "de-risking" of its balance sheet.

Mr Booker has said that the bank is likely to be loss-making for another two years, and warned last week that "delivering some elements of the turnaround plan will become more challenging given that interest rates are now likely to be lower for longer and given the uncertainty surrounding the impact of the UK's decision to leave the European Union".

In January, two former Co-op Bank executives - Barry Tootell, its former chief executive, and Keith Alderson, the former managing director of its corporate and business banking division - were fined and banned by the Prudential Regulation Authority for their stewardship of the lender.

The Co-op Bank's former chairman, Paul Flowers, brought it into disrepute when his drug-taking and sexual proclivities were exposed by a tabloid newspaper, while his financial competence was questioned by MPs (BSE: MPSLTD.BO - news) .