THE Co-operative Bank has set out plans to raise up to £750 million to bolster its capital position as it revealed it had engaged with potential bidders since putting itself up for sale last month.

The troubled lender, which fell into the control of US hedge funds since a £1.5 billion black hole was uncovered in its balance sheet in 2013, disclosed the alternative fund-raising plans after warning in January that its Core Equity Tier 1 ratio will fall below 10 per cent. It said it would seek to raise an additional £700m to £750m to shore up its capital position, which involve a debt for equity swap, alongside a primary equity capital raise of £300m. However it is understood the debt for equity swap could result in heavy losses for bond holders.

The bank, which said has “pleased” with the interest shown by potential bidders since hoisting up the for sale sign, revealed the plans as it reported that it had cut losses to £477.1m last year from £610.6m in 2015. Losses reflected low interest rates and higher than expected turnaround costs linked to its failure to meet capital targets.

Chief executive Liam Coleman said: “In 2016, we continued to deliver significant progress against our turnaround plan rebuilding a customer focused retail bank with strong levels of new mortgage business, growing current account numbers and a distinctive ethical brand; but at the same time we faced a number of challenges. The historically low interest rate environment, legacy issues and the cost of the scale of transformation required continued to impact on the performance of the business. The announcement of a sale and consideration of other options to build capital is therefore about how the Bank sees through the next stage of its turnaround plan.”