Manchester-based Co-op Bank published a first-quarter trading update on Thursday saying that discussions regarding the potential acquisition of the bank by mutually-owned Coventry Building Society “are well advanced following completion of substantive due diligence.”

Co-op Bank said its first-quarter financial performance was in line with expectations and made no change to its full year guidance — excluding “advisory costs relating to strategic options.”

It said its multi-year transformation programme was materially complete with significant milestones achieved — and only 7% of total customers left to migrate.

The bank said investment grade credit rating has been achieved — with its long-term deposit rating upgraded to Baa3 by Moody’s.

On April 18 Coventry and Co-op Bank announced that “non-binding heads of terms have been agreed for a potential acquisition of the bank by the society for a total cash consideration of £780 million.”

The building society said a vote by its members on a transaction “is not required.”

Co-op Bank CEO Nick Slape said on Thursday: “I am very pleased with the bank’s performance in the first quarter of the year.

“Our low risk balance sheet remains resilient, with all key financial metrics and credit quality in line with expectations.

“We are focused on delivering value to our shareholders through the strength of our business model and the hard work of our colleagues.

“I am also delighted to share that we have now achieved an investment grade credit rating, following an upgrade from Moody’s to Baa3.

“This recognition highlights the strength of our financial position and the confidence in our long-term strategy.

“The improved credit rating unlocks opportunities to diversify our customer base by growing our corporate banking book, as well as enhanced funding capabilities, with preparation underway for our Covered Bond programme.

“Furthermore, the bank has now been placed on ‘watch positive’ with Fitch and a ‘review for upgrade’ with Moody’s.

“Significant progress has been made in our IT Simplification programme, which is now nearing completion, with only 6% of savings customers and 14% of mortgage customers left to migrate.

“This creates operational efficiencies, reduces cyber risk and streamlines processes to better serve our customers and colleagues.

“We have recently announced a series of organisational changes across the bank, which are expected to result in a net reduction of approximately 400 roles, and whilst the decision was not taken lightly, it is essential if we are to become a more agile and efficient organisation.

“Colleague wellbeing and customer service remain central throughout this process.

“On 18 April, the bank and Coventry Building Society announced that non-binding heads of terms had been agreed in relation to the potential acquisition of the bank, and are now working together on the next stages.

“In the meantime, we remain focused on delivering our strategic plan and great service for all our customers.”