Bank up for sale with interest rates blamed
THE Co-op Bank has put itself up for sale as it struggles to rebuild its financial strength, four years after being rescued from the brink of collapse by a group of hedge funds.
The loss-making lender, whose 4,000 staff and 105 branches serve 4 million customers and which is 20 per cent owned by the mutual Co-op Group, said it had made “considerable progress” in turning the business around after a £1.5billion black hole in its accounts.
But despite reducing its cost base by a fifth since 2014, it expects a “significant” loss for 2016. It was £610.6million in the red the previous year.
It blamed lower-for-longer interest rates for hampering its progress along with higher-than-expected costs in revamping a business after years of underinvestment.
The Co-op Group has written down the value of its stake to £140million, implying a total value for the bank of about £700million.
As well as seeking a potential buyer, it continues to look at other options to meet longer-term capital requirements to withstand a future financial shock.
Co-op Bank chairman Dennis Holt said it continued to meet its capital requirements set out by the Bank of England’s Prudential Regulation Authority (PRA). He added: “At the same time, since we began work on the turnaround, the board has always been clear that we would need to build capital for the future. We are now commencing a sale process, alongside other options.
The bank’s ethical heritage and customer proposition will be a central consideration in this.”
The Co-op Group, 2 million of whose members are bank customers, said it is “supportive” of the plan to find the bank “a new home”. PRA said it welcomed the actions, adding: “We will assess the bank’s progress in building greater financial resilience over the coming months.”
When still owned by the Co-op, the bank had tried to buy TSB branches from Lloyds Banking Group before its finances unravelled following a disastrous merger with Britannia building society in 2009. TSB, now owned by Spain’s Sabadell, is a potential buyer.