DIRECTORS of The Co-operative Bank may struggle to find a buyer for the lender which has put itself up for sale after a difficult few years leaving it facing a potential break up a leading sector analyst has said.

The Co-operative Bank hoisted the for sale sign yesterday when the board highlighted the challenges posed by the low interest rate environment and the costs associated with the turnaround plan for the business, which nearly collapsed in 2013.

The bank, which is 20 per cent owned by Co-operative group with the balance held by US hedge funds and other investors, said it expects to post a significant loss for 2016 and is inviting offers for all of the business.

Chief executive Liam Coleman said: “While our plan has been impacted by lower for longer interest rates, the costs associated with the sheer scale of the transformation and the legacy issues we faced in 2013, there is considerable potential to build the Bank’s retail franchise further using the strength of the brand, its reputation for strong customer service and distinctive ethical position.”

Co-operative bank has around four million customers and 105 branches, including two in Scotland. The branches in Glasgow and Edinburgh employ 13 people in total.

Sandy Chen, banking analyst at Cenkos, observed: “The name of a buyer does not spring to mind.”

Noting the bank had appointed investment bankers in August to help advise on a possible sale, Mr Chen said it is likely to have already approached all of the firms that could be considered likely to bid.

He added: “It is still quite a large balance sheet and should be attractive to strategic investors but the question is do you buy the entity or just buy some of the loan books.”

Andy Gooding, chief executive of OneSavingsBank, told the Financial Times the property lending specialist would look at any portfolios that met its criteria.

Regarding an overseas bidder acquiring Co-operative Bank, Mr Chen noted there may be simpler ways of buying UK assets.

The BBC reported that TSB had said it would be interested if the price was right but a spokesperson for the firm said it had no comment to make. Spain’s Sabadell bought TSB in 2015.

Graeme Hartop, chief executive of Edinburgh-based private bank Hampden & Co, said: “You look at the Sabadell deal with TSB – TSB were obviously in a different position with a much cleaner balance sheet I guess than the Co-op was at this stage. It was seen as a good way of them breaking into the UK marketplace. So you could see something like that possibly happening, but an awful lot of analysis would need to be done on the Co-op balance sheet beforehand.”

A banking source noted that Glasgow-based CYBG, which owns Clydesdale Bank, and Spain’s Santander had shown interest in buying Royal bank of Scotland’s Williams & Glyn arm.They may want to acquire a bigger SME business than Co-operative bank can offer.

CYBG had no comment to make yesterday. A spokesman for Santander said: “While our focus is on organic growth, we will continue to analyse opportunities in our 10 core markets where they add value and benefit to our customers and shareholders.”

The Co-operative Bank faced crisis in 2013 after the discovery of a £1.5 billion black hole in its finances in the wake of the 2009 merger with the Britannia Building Society and it completed a painful debt for equity swap.

Directors have been trying to rebuild its fortunes since then against the backdrop of challenging market conditions.

Mr Coleman said: “Since 2013, we have successfully addressed significant legacy issues, reduced the cost base and rebuilt our franchise and customer proposition.”

Chairman Dennis Holt said the bank has met regulatory capital requirements continuously since 2014 and expects to continue to do so.

He added: “Since we began work on the Bank’s turnaround, the Board has always been clear that we would need to build capital for the future. “ It will consider a sale alongside other options.

The bank said the expected loss for 2016 was driven largely by continued high remediation and strategic project costs, noting past underinvestment in systems and processes.Co-operative Group is supportive of the plan to find it a new home.