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LONDON (Reuters) - Britain's Co-operative Bank said it will seek to raise up to 750 million pounds of additional core capital if its plan to sell itself fails, as the lender reported a 2016 loss of 477 million pounds.
The capital raising plan could include swapping debt for equity in the bank as well as raising around 300 million pounds in new shares, the bank said, as it seeks to meet long-term regulatory capital requirements.
If neither plan works, Co-Op Bank said it faces intervention by regulators including the possibility of being closed down, in what would be a first test of new bank resolution powers granted to the Bank of England after the 2008 financial crisis.
Chairman Dennis Holt said the bank has made progress on a plan announced a month ago to sell itself, and that there is no fixed timetable for that process.
"We are pleased with the interest to date and engaging with potential bidders as planned," Chief Executive Liam Coleman said.
The debt-for-equity swap being considered would convert bonds held by creditors into shares in the bank, boosting the lender's regulatory capital position but potentially leading to heavy losses for those investors.
The bank has not made a profit since 2011 and has struggled to rebuild its capital position after being rescued from the brink of collapse by a group of hedge funds in 2013.
The bank has blamed low interest rates and higher-than-expected costs in implementing its turnaround plan for its failure to meet capital targets set by the Bank of England's Prudential Regulation Authority (PRA).
The PRA last month said it welcomed the bank's decision to put itself up for sale as a possible solution to increasing its capital levels.
CEO Coleman said the bank plans to close 10 branches in 2017, after closing 59 last year, as it seeks to further slash costs.
Coleman declined to comment on how many jobs would be affected by the closures.
The bank's current cost-income ratio is 103 percent, Chief Financial Officer John Worth told reporters on a conference call on Thursday, meaning the lender spends more than it earns.
Reporting by Lawrence White; editing by Susan Thomas and Jason Neely