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Co-op Bank halves its annual losses Co-op Bank offers boss £5m pay package as losses halve
(about 3 hours later)
The troubled Co-operative Bank has more than halved its annual losses and announced a further 57 branch closures this year. It will keep its chief executive Niall Booker until the end of 2016 to help it restore its fortunes. The troubled Co-operative Bank has offered its chief executive Niall Booker a substantially larger pay package of up to £5m this year as it signed him up until the end of 2016 to help the bank restore its fortunes.
The mutual made a statutory loss before tax of £264.2m in 2014, compared with a £632.8m loss the year before. The 2013 figure was revised from £1.3bn loss because of a £688.3m gain to the value of debt. Booker said the bank will be lossmaking for a further two years, as it more than halved its 2014 losses and announced 57 branch closures this year. “We are in the early stages of the turnaround and there is still much to do to transform the organisation into a sustainable business,” he said.
The Co-op Bank, which came close to collapsing two years ago after a string of scandals and the discovery of a £1.5bn black hole, said the performance of its core business “stabilised” in the second half of last year, although the number of current accounts fell 4% over the year as a whole.. The Co-op Bank will speed up asset sales, including a £7bn portfolio of buy-to-let mortgages it acquired as part of its ill-fated merger with the Britannia Building Society. The mortgage book will be sold in batches to improve the lender’s capital position. It was the only UK lender to fail a “stress test” set by Britain’s financial watchdog last year.
The bank closed 72 branches last year with the loss of 993 staff. With plans to shut a further 57 branches this will leave the Co-op with a network of 165 branches, still larger than it was before the troubled merger with Britannia.. The group, which came close to collapsing two years ago after a string of scandals and the discovery of a £1.5bn black hole in its finances, made a statutory loss before tax of £264.2m in 2014, compared with a £632.8m loss the year before. The 2013 figure was revised from a £1.3bn loss because of a £688.3m gain to the value of debt. Charges for misconduct and legal issues, including the mis-selling of payment protection insurance, fell to £101.2m last year, from £411.5m in 2013.
Booker, a former HSBC executive, was parachuted in to the Co-op in 2013. He was due to leave this June, but has agreed to stay on “at least” until 31 December 2016. His multimillion-pound package raised some eyebrows, however. The Co-op Bank stressed that its new contract “places a much greater emphasis on variable compensation tied to a full range of key performance metrics as the bank progresses its turnaround”. The lender said the performance of its core business “stabilised” in the second half of last year. The number of current accounts fell by 66,000, or 4%, over the year to 1.4m, but all of them were lost in the first half..
Booker said: “Over the course of 2014 the management team has continued to take significant steps to implement the strategy and to turn the bank around. The Co-operative Bank is stronger than a year ago and we end the year with a strengthened capital position.” The bank closed 72 branches last year with the loss of 993 staff, shrinking the number of full-time employees to 5,711. With plans to shut a further 57 branches this year, the Co-op will be left with a network of 165 branches, still larger than it was before its merger with Britannia.. The planned branch closures will lead to 61 job losses, mainly managers, with most branch staff being redeployed.
He added: “However, we are in the early stages of the turnaround and there is still much to do to transform the organisation into a sustainable business. There are a number of matters where the Bank does not yet meet FCA and PRA regulatory requirements and expectations. The revised plan, accepted by the regulators, seeks to address this.” Booker, a former HSBC executive, was parachuted in to the Co-op in 2013. He has agreed to stay on “at least” until 31 December 2016. He is in line for a maximum pay package of £4.97m this year after making £3.1m in 2014 – “against very stretching targets,” the chairman, Dennis Holt, said. For 2016, he is in line for up to £4.5m. Last year’s maximum deal was £4.3m.
Holt, the former head of Lloyds TSB’s retail arm, stressed that a bigger proportion of Booker’s package is now variable pay, i.e. dependent on meeting performance targets. The chief executive’s basic salary rises to £1.3m from £1.2m and he will be entitled to a bonus of up to £1.25m this year. His previous pay package had already raised some eyebrows.
The former Co-op chief executive Euan Sutherland had to leave last spring after details of his £6.6m two-year pay deal were leaked. The Co-op Bank paid out £8.3m in pay and bonuses to senior management last year, down from £9.5m in 2013.
Booker pointed to signs of a turnaround: the bank gained 1,000 primary current account customers (those who pay in their salary) between the first and the second half of 2014, taking the total to 651,000. The new mobile app launched a year ago now has more than 275,000 active users.
The Co-op Bank was rescued in late 2013 by bondholders, led by US hedge funds, which took control of the business. Its long-time owner – the mutually owned Co-operative Group – ended up with a minority holding of 20%, but is remains the largest shareholder.