The Co-op Bank puts itself up for sale

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The Co-op Bank says it is putting itself up for sale and is inviting offers to buy all of its shares.

The bank, 20% owned by the Co-operative Group, almost collapsed in 2013, and was bailed out by US hedge funds. The bank has four million customers and is well know for its ethical standpoint, which it says makes it “a strong franchise with significant potential” when it comes to a sale. It has not been able to strengthen its finances because of low interest rates.

‘Financial resilience’

Bank of England sources told the BBC that the Co-op had been operating with below recommended capital levels for some time, so an action plan was needed. From among potential buyers, the TSB has told the BBC that although they are focused on completing the separation of their IT systems from Lloyds, it would be interested if the price was right. A spokesman for the Bank of England’s Prudential Regulation Authority said it welcomed the action announced today by the Co-operative Bank. “We will continue to assess the bank’s progress in building greater financial resilience over the coming months,” it added.

Black hole

The Co-operative Bank merged with the Britannia building society in 2009. The deal was later held responsible for the near collapse of the bank. In 2013, the bank revealed a £1.5bn black hole in its accounts, which led to its rescue. Bank chairman Paul Flowers also stepped down over concerns about expenses in 2013, before pleading guilty to drug possession the following year. And in January 2016 the Bank of England banned two former Co-operative Bank executives – former chief executive Barry Tootell and former managing director Keith Alderson – from holding senior banking positions. In the autumn of 2015 the Co-op Bank said it would remain loss-making until the end of 2017.

‘Customer service’

Dennis Holt, bank chairman, said: “Customers value the Co-operative Bank and our ethical brand is a point of difference that sets us apart in the market. “While our plan has been impacted by lower for longer interest rates, the costs associated with the sheer scale of the transformation and the legacy issues we faced in 2013, there is considerable potential to build the bank’s retail franchise further using the strength of the brand, its reputation for strong customer service and distinctive ethical position.” The bank also said it had made considerable progress in delivering its continuing turnaround plan. And it says it is considering ways to raise funds from existing and new providers. Separately, it says it has resolved a key contractual differences with Capita.Western Mortgage Services, part of Capita, will continue to provide mortgage administration services and new mortgage application processing for the bank and its clients.


Co-op Bank to cut 200 jobs in Manchester and Stockport

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Co-operative Bank is cutting 200 jobs as it looks to continue its recovery. Staff have been told the posts will go by March and will mainly affect management and head office roles in Manchester and Stockport. Deputy chief executive Liam Coleman said the cost reductions were “critical” as it continues its three-year plan to rebuild the business. The bank almost collapsed in 2013 and it expects to continue to be loss-making until the end of next year.

‘Difficult journey’

Mr Coleman said: “These cost reductions are critical to progressing our turnaround and delivering a cost base which supports a sustainable core bank.” He said it would continue to consult colleagues and trade unions on the proposals over the coming weeks. “We have made progress in turning the bank around since 2013, but have always been clear that the bank’s recovery is a difficult journey.” He said the business would not make a profit this year or next year while it continues its “turnaround plan in a challenging economic environment”.

‘Real blow’

Rob MacGregor, national officer at trade union Unite, said: “The speed and breadth of these cuts will hit the Co-operative Bank’s much cherished customer service and with it the bank’s unique selling point. “Compulsory redundancies are anathema to all trade unions, but the timing of this exercise just before Christmas is a real blow to our members.” He said the union would be supporting members and pressing the bank to reconsider the cuts where possible. The bank was owned by the Co-operative Group until 2013, when a £1.5bn hole was discovered in its finances. The group had to go to outside investors to support the Co-op Bank, which is now 80% owned by US hedge funds, with the remainder held by the Co-op Group.

BBC News

 


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