The loss could be attributed to a £3.2bn provision the bank made in August 2010 after it inappropriately sold payment protection insurance.

The banking group has reduced its noncore assets by £53bn to £141bn last year and expects to further reduce noncore assets to less than £90bn by 2014, according to the company.

For the quarter ended 31 December 2011, the firm pre-tax profit stood at £937m against a £276m loss for the same period in 2010.

The bank with 41% government stake will reduce around 15,000 jobs and the EU-enforced sale of 632 branches – dubbed Project Verde.

The bank, which owns more than 2,000 branches in the UK has named the Co-operative Bank as the preferred buyer last year.