Co-op on Tuesday said it made an operating profit of 14.3 million pounds for the year to date, an improvement of 40 million pounds helped by lower costs.

The bank agreed a rescue plan last year with U.S. hedge fund creditors after its capital base, hit by restructuring costs and weak income, fell to levels unacceptable to regulators.

New Chief Executive Andrew Bester said the bank is thinking about a move into small business banking via an application for a funding scheme supported by Royal Bank of Scotland as part of the conditions of its state bailout.

"We are looking to build on our strong heritage in the SME market in the year ahead and as part of that we are considering our options regarding the RBS alternative remedies fund," Bester said.

(Reporting by Lawrence White; editing by Jason Neely)