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| Co-op Bank warns of more branch closures as it reports £477m loss | Co-op Bank warns of more branch closures as it reports £477m loss |
| (about 5 hours later) | |
| Co-operative Bank has reported its fifth consecutive year of losses and warned of more branch closures and job losses as its struggles to restore its fortunes following its tie-up with Britannia Building Society. | Co-operative Bank has reported its fifth consecutive year of losses and warned of more branch closures and job losses as its struggles to restore its fortunes following its tie-up with Britannia Building Society. |
| Its annual report for 2016 shows a loss of £477m – taking its cumulative losses to £2.6bn – and spelled out that it would seek £750m of new capital if it could not find a buyer. | Its annual report for 2016 shows a loss of £477m – taking its cumulative losses to £2.6bn – and spelled out that it would seek £750m of new capital if it could not find a buyer. |
| Despite its troubles, sparked when a £1.5bn capital shortfall was uncovered in 2013, the bank which prides itself on its ethical stance has attracted 4,147 current account customers during the year. | Despite its troubles, sparked when a £1.5bn capital shortfall was uncovered in 2013, the bank which prides itself on its ethical stance has attracted 4,147 current account customers during the year. |
| The bank’s new management team, led by Liam Coleman, put the bank up for sale last month but is also seeking other ways to find £750m in new capital by tapping its bond holders and issuing £300m of new shares. | |
| Coleman, who took over at the start of the year and is being paid £1.5m, said: “This is a great retail bank and one that is valued by our 4m loyal customers. We believe there is opportunity and potential to build on the progress made and on our distinctive ethical position.” | Coleman, who took over at the start of the year and is being paid £1.5m, said: “This is a great retail bank and one that is valued by our 4m loyal customers. We believe there is opportunity and potential to build on the progress made and on our distinctive ethical position.” |
| He said another 10 branches would need to be closed, on top of the near-200 that have already been shut, taking the network to 95. More job losses are likely although Coleman declined to identify how many were at risk. During its four-year rescue programme the workforce has already halved to 3,895. | He said another 10 branches would need to be closed, on top of the near-200 that have already been shut, taking the network to 95. More job losses are likely although Coleman declined to identify how many were at risk. During its four-year rescue programme the workforce has already halved to 3,895. |
| The bank cannot pay bonuses because of restrictions imposed by the Bank of England while it builds up its financial strength but is paying out £3.6m to staff in a special payment. | The bank cannot pay bonuses because of restrictions imposed by the Bank of England while it builds up its financial strength but is paying out £3.6m to staff in a special payment. |
| The losses this year were, in part, caused by the continued restructuring sparked by the deal with Britannia in 2009. There was another £36m provision for payment protection insurance mis-selling, an £82m hit for a mortgage outsourcing deal with Capita and a knock caused by the cut in interest rates by the Bank of England following the vote for Brexit. | The losses this year were, in part, caused by the continued restructuring sparked by the deal with Britannia in 2009. There was another £36m provision for payment protection insurance mis-selling, an £82m hit for a mortgage outsourcing deal with Capita and a knock caused by the cut in interest rates by the Bank of England following the vote for Brexit. |
| Dennis Holt, the bank’s chairman, stressed the progress that had been made since 2013, when the bank not only faced severe financial stress but was also hit by the revelations about its former chairman Paul Flowers buying drugs. | Dennis Holt, the bank’s chairman, stressed the progress that had been made since 2013, when the bank not only faced severe financial stress but was also hit by the revelations about its former chairman Paul Flowers buying drugs. |
| He said the bank had only been able to put itself up for sale because the “bank is stronger in many areas than in 2013 and these options would simply not have been feasible before”. | He said the bank had only been able to put itself up for sale because the “bank is stronger in many areas than in 2013 and these options would simply not have been feasible before”. |
| The Co-operative Group of supermarkets and funeral homes now owns just 20% of the bank after ceding control to hedge funds during the 2013 rescue, which Holt reiterated had taken place without recourse to the taxpayer. | The Co-operative Group of supermarkets and funeral homes now owns just 20% of the bank after ceding control to hedge funds during the 2013 rescue, which Holt reiterated had taken place without recourse to the taxpayer. |
| Holt would not put a timescale on when a decision needed to be made about selling the bank or injecting fresh capital by forcing bondholders to take losses. | |
| Holt said he was “pleased with interest to date” but would not give any further information about a potential sale. | Holt said he was “pleased with interest to date” but would not give any further information about a potential sale. |
| The bank has a cost-to-income ratio of 103% – indicating that it costs more to run than it generates in revenue – in part because “prior issues” with the turnaround plan put in place by Coleman’s predecessor. The bank is unable to say when it might return to profit. | |
| The annual report repeated its warning – as it has done for the past three years – “that there are material uncertainties which may cast significant doubt on the bank’s ability to continue as a going concern”. | The annual report repeated its warning – as it has done for the past three years – “that there are material uncertainties which may cast significant doubt on the bank’s ability to continue as a going concern”. |
| The bank is meeting the capital requirements set out by international regulators but not the requirement specifically tailored by the Bank of England’s Prudential Regulation Authority. Its key measure of strength – its core tier-1 capital ratio – fell to 11% from 15.5%. | |
| The risk warnings in its annual report said that if it could not achieve its goals “the Bank of England may impose particular directions or a special resolution procedure”. | The risk warnings in its annual report said that if it could not achieve its goals “the Bank of England may impose particular directions or a special resolution procedure”. |
| This special resolution procedure has been put in place since the financial crisis with an aim to avoid taxpayers bailing out troubled banks, requiring bond holders to take losses. | |
| The Co-op said the Bank has approved its new IT systems and accepted its new five-year plan which runs until 2021. It includes increasing lending by £1bn each year and also aiming to cut costs from £445m in 2016 to £350m a year from 2018, which could indicate further job cuts. The bank is also required to meet the Bank of England’s capital requirements from 2018 when it has signalled it will need to raise a further £250m though bond issuance. | |
| Coleman has waived his entitlement to a long-term incentive plan – a bonus measured over three years – of £1.3m. His predecessor, Niall Booker who was brought in during the 2013 crisis, received £2m last year and has bonuses outstanding. |