Co-Op will go bust without £1bn injection, warn bosses
Co-operative Bank lost a staggering £709m in the first half of 2013 and has warned bondholders that if they do not approve a £1bn raising of fresh capital later this year, it will go bust.
"There is no Plan B," said Co-op Group chief executive Euan Sutherland. "We are standing firmly behind the bank. Having looked at all the options, the plan we have come up with is the one which is the best interests of the greatest number of stakeholders."
He added: "We are sorry, but we are a new team grasping the nettle and getting on with fixing the problems."
The bank's chairman, Richard Pym, said without new capital, "we will not be a going concern".
Sutherland also warned that the future bank would be much smaller than today. He would not comment on how many of the bank's 10,000 staff will lose their jobs or how many of its 320 branches will close. He said: "It is inevitable that there will be some jobs at risk. That is the very unfortunate consequence of what we have to do."
Co-op Bank took writedowns and one-off charges totalling £740m in the first half of 2013. These included bad loan charges of £496m, of which three quarters is related to what it has decided is its non-core business and the rest is from ongoing business.
Niall Booker, the bank's new chief executive, said the bulk of the losses came from the Co-op's ill-fated take-over of Britannia Building Society in 2009. A further £148m writedown came as the result of scrapping a planned new IT system. That took total IT writedowns to £300m.
Booker said this was the result of the bank's ambitious plans for growth, including the attempted purchase of 630 Lloyds branches, known as Project Verde. That collapsed earlier this year leading to the downgrading of Co-op Bank bonds to junk and the Prudential Regulatory Authority's demand that it find an extra £1.5b of capital.
Other charges were £61m for compensating customers who were mis-sold products.
Sutherland said that while the bank lost most of its wholesale and corporate deposits following the rating downgrade, its 4.7 million retail customer base had stayed "incredibly loyal".
There is only one branch of the Co-operative Bank and one branch of Britannia Building Society in Northern Ireland.The Co-operative Society as a whole has 88,000 members here. They also have 32 Co-operative Food stores served by an 8,000 sq ft warehouse in Carrickfergus, nine Co-operative Pharmacy branches and 19 funeral homes which are part of Funeral Services Northern Ireland, but owned by the Co-operative Group. The Co-operative Group employs around 1,000 people in Northern Ireland.