Coventry Building Society has made an audacious bid to take over Co-op Bank to create a new super-mutual with around £90bn of assets.
Talks are ongoing, according to a report by Sky News, but are not exclusive leaving the way open for others though several previous offers have already fallen through.
Co-op Bank's management put itself up for sale earlier in the year with a deadline of October for bids to be tendered.
Co-op Bank has also seen interest from challenger banks Shawbrook, which made a £3.5 billion approach in August, and Aldermore. Shawbrook was taken private by its former owners in 2017 and Aldermore (AIM:ALD) was bought by South Africa's FirstRand Group in the same year.
Co-op Bank talks with Cerberus Capital Management broke down in December 2020.
Analysts said the Coventry deal looks to make sense on paper.
Nationwide, with over £270 billion of assets, is currently the only mutually-owned banking group with the scale to challenge the high-street giants but a combined Coventry BS and Co-op Bank would be comparable in size to Virgin Money with around five million customers.
According to the report, City analysts value the Co-operative Bank at around £800 million and suggest that a takeover would be an ambitious and big step for the mutual and its management.
A spokesman for the mutual told the media: "At Coventry Building Society, we remain open to opportunities that may enhance the value and services we offer to our current and future members, but we don’t comment on any public speculation."
Co-op Bank was taken over by bondholders in 2013 after a tabloid scandal surrounding its chairman Paul Flowers led to a liquidity crisis that put the bank on the brink of collapse, with a consortium of hedge funds taking control in 2015.
A syndicate of hedge funds, including Silverpoint Capital and GoldenTree, and private equity giants Bain Capital and JC Flowers currently own the business.