City sources say Co-operative Bank will seek buyer to take over whole business rather than be broken up

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The Co-operative Bank will seek a buyer to take over the whole business rather than be broken up, according to City sources.

The bank is still struggling with mounting losses and there has been feverish speculation over its future since it revealed last month that its capital reserves are lower than previously thought.

The organisation, formerly part of the Co-operative Group, could sell off its different lines of business separately if it comes under pressure from the Bank of England.

Hard times: The bank is still struggling with mounting losses and there has been feverish speculation over its future

But City sources said the bank would be more valuable if sold off in one go because of the ethical cachet of the Co-op name.

The Bank of England has allowed it to continue operating on the basis that it has a plan to shore up its finances. 

However, results due next month are expected to show losses are still growing more than three years after it was hit by a £1.5 billion black hole in its finances.

Co-op Bank was formerly part of the wider Co-op Group, but was taken over by its creditors in the wake of the crisis and is now owned mainly by its former lenders, including some US hedge funds.

Like other banks, the Co-op has been squeezed by the cut in interest rates to a record low. 

Meagre rates squeeze profits because banks must pass on lower rates to lenders to stay competitive, but cannot cut rates for depositors as most current accounts pay little or no interest.