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Co-op Bank offers boss £5m pay package as losses halve Co-op Bank offers boss £5m pay package as losses halve
(about 7 hours later)
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 restore the bank’s fortunes. The chief executive of the troubled Co-operative Bank is being handed a potential £5m pay deal as he prepares to axe more jobs and close another swath of branches.
Booker said the lender will be lossmaking for “at least” 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. Niall Booker, hired in the midst of the 2013 crisis, has been handed the higher pay deal, a rise of up to £1.9m to sign him up until the end of 2016 to help restore the loss-making bank’s fortunes.
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 bank of eight highstreet lenders to fail a “stress test” set by Britain’s financial watchdog last year. Even though losses were more than halved in 2014, Booker said the lender would be lossmaking for at least another two years and that another 57 branch closures would be required on top of 72 last year when 993 jobs were lost. The Co-op will be left with a network of 165 branches and another 61 roles will be lost.
The Manchester-based lender, 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, who was paid £3.1m last year, said:“We are in the early stages of the turnaround and there is still much to do to transform the organisation into a sustainable business”.
The Co-op Bank 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.. His new pay deal, to keep him untilat least until 31 December 2016, could amount to £4.97m this year and £4.5m in 2016, and sparked controversy.
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 closures will lead to 61 job losses, mainly managers, with most branch staff being redeployed. Peter Hunt, a managing partner at Mutuo, an advisory consultancy to mutually owned businesses, said: “Co-op members will be shocked and angered by this. Having already paid the price of the bank’s near collapse, they are helpless bystanders as executive pay spirals away from reality. Ordinary staff have lost their jobs whilst top management are being paid as premier league footballers. It’s not ethical and it’s certainly not co-operative.”
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 and £4.5m in 2016, after making £3.1m in 2014 – “against very stretching targets,” the chairman, Dennis Holt, said. Last year’s maximum deal was £4.3m,. The Co-op Group owned the bank until 2013 when it was rescuedby bondholders, led by US hedge funds, leaving the UK’s largest mutual with a a minoritystake of 20%.
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. Unions were also critical. The TUC general secretary, Frances O’Grady, said: “Excessive executive pay is an ongoing problem across the banking sector, where remuneration expectations need bringing back down to earth. The leadership culture in banking has to change to one of stewardship, rather than one of cashing in.”
The former Co-op Group 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. Deborah Hargreaves, the director of the High Pay Centre, said the deal was “way over the top”.
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 is a bank that trades on its ethical values, yet it is paying a package that compares favourably with the high street banks. Maybe it doesn’t realise that its customers would also expect ethics to apply to pay,” she said.
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. Dennis Holt, the bank’s chairman, said Booker’s pay last year was set “against very stretching targets”.
The “ethical” bank’s former chairman Paul Flowers, nicknamed the Crystal Methodist, resigned amid a drug scandal and was fined for drug possession last year. The former senior Lloyds banker said a bigger proportion of Booker’s package was now dependent on meeting performance targets. His basic salary rises to £1.3m from £1.2m and he will be entitled to a bonus of up to £1.25m this year.
The Manchester-based lender made a 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.
It paid out £8.3m in pay and bonuses to senior management last year, down from £9.5m in 2013.
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, will now be sped up. The mortgage book will be sold in batches to improve the lender’s capital position. It was the only UK bank of eight highstreet lenders to fail a “stress test” set by Britain’s financial watchdog last year.
The bank 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 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.
He is aiming to turn the bank around after it was order to fill a capital shortfall and its former chairman Paul Flowers was fined for drug possession last year.
The Co-op Group has been forced to delay its results by a week to incorporate the bank figures.