The Co-operative Bank, who has always marketed itself as an ethical financial institution, is looking to raise £400m to address issues such as mis-selling of PPI, mortgage product first payments, interest rate swaps, third party insurance and technical breaches of the Consumer Credit Act.
In addition, one off costs and processes associated with the separation of the Co-operative Bank from the Co-operative Group have proved more costly, more time consuming and more complex than anticipated.
The Co-operative Bank, who operate a call centre based in Stockport’s famous pyramid building, has stated that as a result of the additional costs and in order to restore the capital buffer that the new executive and Board feel is responsible and appropriate for the Bank, they intend to raise around £400 million of additional CET1 capital, subject to the finalisation of the 2013 Annual Report and Accounts, in the form of new ordinary shares in the coming months.
The bank said it expects to post a loss of between £1.2bn and £1.3bn for 2013.
Chief executive Niall Booker said:
“The new executive team brought in just nine months ago is continuing to review aspects of the Co-operative Bank’s legacy operations, assets and liabilities.
“As a result of this continuing review we are unearthing a range of issues which the new executive team is having to address. Whilst these risks were identified in the liability management exercise prospectus the review means we are now quantifying the financial impact of some of those risks.
“The result of providing for these items together with the cost of separation from the Co-operative Group is that the starting capital position of the bank for the four to five-year recovery period is weaker than in the plan announced last year. The proposed capital raise would enable us to reset this starting point and continue with the execution of our original business plan.
“The objectives of this plan remain unchanged and there are some early indications of progress. We have started to simplify the business, reduce costs and de-risk assets as we drive the change needed to return to our roots as a bank focused on our retail and SME customers. However, there remain significant challenges ahead.”
The Co-operative Bank’s Annual Report and Accounts are also expected to contain an update as to the progress of the business plan where highlights are expected to include a return to community banking and providing more support to small businesses.
Read the full report here – The Co-operative Bank