Co-op Bank is riskier than banks in Italy

INVeSTING in the co- op bank is considered more risky than even Italy’s troubled financial stocks.

Interest rates on bonds at the bank are 39pc – twice as high than in banks such as Veneto banca which is in need of emergency funding from the Italian banking sector.

Panicked investors are ditching co-op bank debt ahead of a looming repayment deadline, as fears grow over its health.

It is due to repay £400m of bonds in September – but investors are increasingly fearful they will be forced into a loss as bosses scramble to build up cash reserves.

bonds have dropped to 86p in the pound from 90p on march 7 – and they are down from an average of 98p since being issued in 2010.

A lower price suggests a selloff has begun, with traders fearing they might not get their money back. The co-op bank has been 80pc owned by US hedge funds since it was almost destroyed by an accounting scandal four years ago.

Despite efforts, losses have continued. The lender has been put up for sale and investors will be called on to pump in another £750m if no buyer can be found.

The bonds fell for a seventh consecutive day yesterday and are approaching the 85p record low they reached last month. The co-op bank lost £477.1m last year, a slight improvement on the £610.6m it lost in 2015.

Analysts are concerned because day-to-day operations cost it £481m in 2016, more than the total £448m it earned from customers. However, chairman Dennis Holt insisted there was no danger the bank might run out of money.

A spokesman said: ‘The bank is currently undertaking a well ordered sales process.

‘As noted previously, we are pleased with the interest shown to date and are engaging with potential bidders as planned.’