The Co-operative Bank is leading the race among firms vying for Sainsbury’s Bank mortgage portfolio, worth £650m, reported Sky News.

This sale would mark supermarket chain Sainsbury’s withdrawal from the UK mortgage space following its discontinuation of new lending in 2019. 

Citing an insider, the publication said that Co-operative Bank is a ‘frontrunner’ in the process that is being managed by professional services firm Deloitte.

Co-operative Bank and Sainsbury’s spokespeople did not comment on the matter.

UK’s challenger lender Starling Bank, too, was previously interested in the mortgage book but has now backed out. 

The Co-operative Bank has been weighing potential acquisitions for over a year as it looks to consolidate the mid-size banking market.

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In February last year, Sky News reported that the bank hired PJT Partners to help it evaluate potential targets and offer advice on the funding needs for a deal.

Prior to this, Spain’s Banco de Sabadell rejected the proposal by Co-operative Bank to acquire its British unit TSB Bank.

Co-operative Bank, owned by a syndicate of private equity firms and hedge funds, was willing to pay more than £1bn for the purchase.

The Sainsbury’s bid is said to highlight the bank’s revival, which has neared collapse twice in the past ten years.

Buoyed by interest rate hikes, the lender is projected to report improved performance in its annual results that will be released next week. 

The latest news comes close on the heels of another Sky News report, which said that Sainsbury’s rival Tesco is considering a review of its UK banking operations including sale plans.

To get advice on the same, the retailer has appointed investment bank Goldman Sachs.