Reuters logo
Co-op Bank takes 700 million pound hit on bad loans, IT woes
August 29, 2013 / 6:32 AM / 4 years ago

Co-op Bank takes 700 million pound hit on bad loans, IT woes

LONDON (Reuters) - Britain’s Co-operative Group took a 700 million pound ($1.1 billion) hit on losses for bad loans, technology problems and customer compensation as it battles to draw a line under troubles at its banking business.

A woman passes a cash machine at a Co-Operative Bank branch in central London June 17, 2013. REUTERS/Luke MacGregor

Co-operative Bank CPBB_p.L said on Thursday it made a pre-tax loss of 709 million pounds in the six months to the end of June, after losing 496 million pounds on loan impairments, writing down its IT systems by another 148 million pounds and setting aside a further 61 million pounds for compensating customers, including for mis-sold insurance products.

The Co-operative Group CWSGR.UL, which is owned by its customers, has come up with a three-pronged plan to fill a 1.5 billion pound capital shortfall identified by regulators at its bank. The parent group will provide 1 billion pounds - half from disposals and restructuring and half from bank loans - and 500 million is due to come from writing down the value of its bonds. Some bondholders are fighting the plan.

“There are no quick fixes here. This will be a challenging four-year turnaround that begins with our comprehensive plan to restore the bank to stability,” said Euan Sutherland, who became chief executive in May and is in charge of new management teams at the group and bank.

Co-op Group, which runs supermarkets, pharmacies and funeral services, will retain a majority stake in the Co-op Bank, which has 4.7 million customers, under its plan to list shares in the bank in the fourth quarter.

A woman leaves a Co-Operative Bank sited next to a Lloyds Bank in Birmingham, central England April 24, 2013. REUTERS/Darren Staples

Co-op said the rescue plan is now unlikely to lift the bank unit’s core capital above 9 percent by the end of this year as it had expected when it unveiled the plan in June, but said it will lift it above the regulatory minimum.

It said it expects to sell its general insurance business during 2014 and has already sold it life insurance and savings business.

The problems unearthed at Co-op Bank have sparked criticism of the bank, its parent group and regulators for allowing Co-op to buy the Britannia Building Society in 2009 and then try to buy 630 Lloyds (LLOY.L) branches, a deal which collapsed in April.

They were also a blow to many politicians who lauded the Co-op as a good customer-owned firm that could compete with mainstream banks.

Co-op Group reported a pre-tax loss of 559 million pounds, as profits in its food and other arms were overwhelmed by the banking losses.

Editing by Laurence Fletcher and Mark Potter

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below