Roll up, roll up: UK banks are up for sale

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This month and next, the Lloyds privatization will compete for attention with Barclays' £5.8 billion ($9.03 billion) rights issue. Then there's the IPO (initial public offering) triplets: Williams & Glyn, Virgin Money and TSB – all set to hit the market with aplomb. And that's before Royal Bank of Scotland has turned up at the privatization big top.

But who's buying and why do they want to?

After a catastrophic five years in the bank sector, investors are still licking their wounds and the current power struggle between Co-op's bondholders and its parent about the structure of the forthcoming "bail in" could push investors either way.

Since the financial crisis, British banks have seen their value crash by upwards of 50 percent while their balance sheets have faced the biggest retrenchment in modern history. In the wake of the first bank run since 1866, taxpayers have been left with a £107 billion bill, while shareholders have made only paltry gains compared with massive losses.

The scale of upheaval has seen a third trimmed from RBS' £1.2 trillion balance sheet, while its investment bank has been cauterized by political fervor.

(Read more: UK Bank Co-op Confirms Requires Additional Capital)

And yet, many intrepid fund managers have begun to wonder whether U.K. banks could return to being the utility-style, high-dividend payers they used to be. After all, many U.K. banks are a levered play on the U.K. economy and if economic recovery is on the horizon, coupled with interest rate hikes, then U.K. retail banking will be the top act in the high top.

Daredevil challenges

But these financial institutions still face daredevil challenges from sharp-toothed regulators and known - and unknown - redress costs.

The day Alan Sugar – a man who really should have known better – made a complaint against Lloyds for mis-selling interest rate swaps was the day "caveat emptor" died and banks realized just how vulnerable they were.

(Read more: Barclays plans $9 billion cash call after mis-selling hit)

Then there is the issue of IT systems and cyber security, which British intelligence described as the biggest threat to the U.K. economy. The lenders are currently turning somersaults to investigate how much of a nightmare this really is.

Add to this, not only balance sheet and capital misdemeanors, but a litany of scandals: from money laundering to price manipulation to mis-selling.

Will banks ever be the same – not just for customers, employees and politicians – but for investors? Well, clearly they won't – but they could still be a decent bet for investors.

High Wire Act

Banks have always been notoriously inefficient and one thing the crisis has achieved is trimming much of the fat, with Lloyds ahead of the pack in driving down costs.

And the return of life to the housing market has come at a propitious time for all those promoters of bank shares - or asset sales.

(Read more: New RBS boss McEwan tasked with restoring bank to health)

The U.K. mortgage market is 10 percent bigger now than it was at the time of Northern Rock's collapse and all guesses are that this will continue to grow. In the U.K. there are 27 million homes worth a total of £4 trillion. Over £1.5 trillion is owned outright with no mortgages.

Just seeing that stock change hands - as new buyers take out loans to buy – would give a massive boost to the mortgage market. Good news for banks. The Vodafone windfall is also good news as investors look for new homes to put their capital to work.

All in all, U.K. banks are probably still a high wire act. But there is definitely money to be made in this circus.

Watch CNBC's week long special report on UK banks. On Tuesday: Lloyds Banking Group.