Published: Tue, February 14, 2017
Economy | By Melissa Porter

The Co-op Bank puts itself up for sale

The Co-operative Group said in a statement: "As a minority investor in The Co-operative Bank, the Co-op Group is supportive of the plan to find the Bank a new home".

Nevertheless, Co-operative Bank said it had seen "considerable progress implementing its turnaround plan, with a customer-focused retail bank being rebuilt". Either way, investors in its shares and bonds face potential losses.

In response to the black hole in the bank's balance sheet, the wider Co-op Group was forced to surrender control of the company when a £1.5bn capital-raising brought in a group of U.S. hedge funds as shareholders in the lender.

As the board started the possible sale process today, the bank said the move was "always considered a potential outcome of the turnaround plan, alongside considering other options to build capital and meet the longer-term capital requirements applicable to all United Kingdom banks".

"The Co-operative Bank delivers an attractive banking proposition that is differentiated by our values and ethics and is highly valued by our 4m customers".

The Co-Operative Bank said these changes had contributed to its recent significant losses and had been achieved despite a challenging interest rate environment, increasing regulatory capital requirements being applied to all United Kingdom banks and without recourse to government funding.

In a note to clients, Peel analysts Christopher Bamberry said: "No indication of financial impact (including potential write offs), but the mortgage processing element will continue to 2020".

A sale was always on the cards as an outcome of its turnaround strategy, though according to a statement released today other capital-building options were also considered.

Capita and The Co-operative Bank have now announced that all aspects of the contractual dispute have been resolved and revised terms agreed. The deal was later held responsible for the near collapse of the bank.

As well as financial problems, the mutual bank was hit by a number of personnel scandals with chairman of the bank Paul Flowers (pictured) exposed as a hard drugs user.

The bank made a loss of £177m in the first half of 2016 and said it is on track for a "significant" full year loss.

The lender's current chairman, Dennis Holt said: "The bank has met its Pillar 1 regulatory capital requirements continuously since 2014 and expects to continue to do so".

Like this: