Troubles at the Co-op Bank continued after the lender reported an annual loss of almost £500m ($608.5m), which it blamed on ongoing low interest rates and expenses related to its merger with the Britannia Building Society.

In the 12 months to 31 December, the lender posted a loss of £477m, lower than the £611m recorded in the previous year, but enough to bring the tally of total losses over the last five years to £2.7bn.

The bank said its merger with the Britannia Building Society was 50% more expensive than originally estimated, with expenses related to the deal reaching £180m, rather than £120m the firm had forecast.

The Manchester-based lender added a combination of historically low interest rate environment, legacy issues and the cost of the scale of transformation required have continued to impact on the performance of the business.

"In 2016, we continued to deliver significant progress against our turnaround plan rebuilding a customer focused retail bank with strong levels of new mortgage business, growing current account numbers and a distinctive ethical brand; but at the same time we faced a number of challenges," said group chief executive Liam Coleman.

"Since 2013 considerable progress has been made fixing the problems of the past and the Bank is now in a very different position than it was in 2013 and stronger in many areas. Many of the remediation projects have now largely been completed and we have reached a number of key transformation milestones this year," said Coleman.

The issues are largely reflected in the financial results, which explains the board's decision to commence a sale process and to look at other options of building capital, the bank said.

Last month, the lender, which is 20% owned by the Co-Operative Group, said the sale was an option it had always considered as a "possible outcome" of its turnaround strategy.

The bank was brought back from the brink in 2013 after a £1.5bn black hole had emerged in its books and was rescued by US hedge funds, although it said it made good progress by cutting its costs by over 20% by 2014,

The fallout from the scandal saw former chairman Paul Flowers step down in 2013, before pleading guilty to drug possession 12 months later. In January 2016, former chief executive Barry Tootell and former managing director Keith Alderson were banned by the Bank of England from holding senior positions in the industry.

Away from boardroom troubles, the persistent low interest rates that have characterised the UK's economic landscape for the last eight years mean the lender, like its peers, has struggled to make a margin between what it pays its borrowers and what it charges its lenders.

The bank's inability to generate a profit has also made the option of owners pouring new capital into business highly unlikely. The Co-op Group has not ruled out the possibility of further investments, but given the bank's struggles, it would appear a risky choice.