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New Co-operative Group head endures rocky start at annual general meeting New Co-operative Group head endures rocky start at annual general meeting
(4 months later)
The new chief executive of the Co-operative Group endured a tense annual general meeting on Saturday, as he faced questions over the group's beleaguered bank.The new chief executive of the Co-operative Group endured a tense annual general meeting on Saturday, as he faced questions over the group's beleaguered bank.
Around 250 delegates from across the country filed into New Century House to meet Euan Sutherland, the one-time head of the Kingfisher group they hope will guide them to safety.Around 250 delegates from across the country filed into New Century House to meet Euan Sutherland, the one-time head of the Kingfisher group they hope will guide them to safety.
The meeting at New Century House, Manchester, was held behind closed doors, with delegates unusually tight-lipped as they arrived. A significant absentee was the Co-operative's outgoing chief executive, Peter Marks.The meeting at New Century House, Manchester, was held behind closed doors, with delegates unusually tight-lipped as they arrived. A significant absentee was the Co-operative's outgoing chief executive, Peter Marks.
Company PRs acknowledged that a departing chief executive would normally have attended, but a spokeswoman said: "He and the board agreed it was best for the organisation to focus on the future. He was due to be there, but there was a change of plan".Company PRs acknowledged that a departing chief executive would normally have attended, but a spokeswoman said: "He and the board agreed it was best for the organisation to focus on the future. He was due to be there, but there was a change of plan".
She declined to comment when asked whether Marks had absented himself because he was now considered "damaged goods", following the collapse of Co-operative Bank's deal to buy 632 branches from Lloyds.She declined to comment when asked whether Marks had absented himself because he was now considered "damaged goods", following the collapse of Co-operative Bank's deal to buy 632 branches from Lloyds.
Sutherland, who has no formal experience of banking, addressed the delegates for a little over 15 minutes. He used part of his speech to explain why he took the job, highlighting "the specialness of the operation" and "the way it holds a special pla~ce in the hearts of the public".Sutherland, who has no formal experience of banking, addressed the delegates for a little over 15 minutes. He used part of his speech to explain why he took the job, highlighting "the specialness of the operation" and "the way it holds a special pla~ce in the hearts of the public".
In a briefing mid-way through the meeting, an aide said: "He acknowledged that there were challenges ahead, but that there were also opportunities and potential." Sutherland's speech was "very well received", she claimed.In a briefing mid-way through the meeting, an aide said: "He acknowledged that there were challenges ahead, but that there were also opportunities and potential." Sutherland's speech was "very well received", she claimed.
The resolutions put to the meeting had been submitted a number of weeks ago. None of them addressed the difficulties that have beset the bank over the past fortnight, including the failure of the Lloyds deal, the resignation of the Co-operative Bank CEO Barry Tootell, and a downgrade to junk status from ratings agency Moody's.The resolutions put to the meeting had been submitted a number of weeks ago. None of them addressed the difficulties that have beset the bank over the past fortnight, including the failure of the Lloyds deal, the resignation of the Co-operative Bank CEO Barry Tootell, and a downgrade to junk status from ratings agency Moody's.
Instead, delegates could only voice their anxieties about the bank's predicament in a question-and-answer session that followed the main business.Instead, delegates could only voice their anxieties about the bank's predicament in a question-and-answer session that followed the main business.
The Co-operative declined to release a copy of Sutherland's speech.The Co-operative declined to release a copy of Sutherland's speech.
Instead, it released a single quote: "Traditional capitalist models are not providing the answer to the concerns of people today. People are looking to us, the Co-operative Group, to find the alternative".Instead, it released a single quote: "Traditional capitalist models are not providing the answer to the concerns of people today. People are looking to us, the Co-operative Group, to find the alternative".
Marks is stepping down after more than 40 years in the co-operative movement. He has been at the helm during a period of rapid expansion for the group, including the acquisitions of Somerfield and Britannia Building Society.Marks is stepping down after more than 40 years in the co-operative movement. He has been at the helm during a period of rapid expansion for the group, including the acquisitions of Somerfield and Britannia Building Society.
One of Sutherland's first tasks will be to inject confidence into the banking arm.One of Sutherland's first tasks will be to inject confidence into the banking arm.
The Moody's downgrade forced the Co-operative to reassure customers on its finances, with the bank saying: "We haven't sought, nor do we need, government support."The Moody's downgrade forced the Co-operative to reassure customers on its finances, with the bank saying: "We haven't sought, nor do we need, government support."
Marks, who has run the member-owned group since 2007, drove its £1.6bn takeover of supermarket chain Somerfield in 2008 and the 2009 rescue of Britannia, then Britain's second-biggest building society.Marks, who has run the member-owned group since 2007, drove its £1.6bn takeover of supermarket chain Somerfield in 2008 and the 2009 rescue of Britannia, then Britain's second-biggest building society.
But the Britannia deal proved a step too far, with toxic commercial property and home loans it inherited dragging its banking arm to losses of £662m in 2012.But the Britannia deal proved a step too far, with toxic commercial property and home loans it inherited dragging its banking arm to losses of £662m in 2012.
That pushed the group to statutory losses of £599m in 2012, from £373m profits a year earlier.That pushed the group to statutory losses of £599m in 2012, from £373m profits a year earlier.
Moody's said the Co-operative under-estimated the risks of the Britannia acquisition, especially against the backdrop of weak economic conditions.Moody's said the Co-operative under-estimated the risks of the Britannia acquisition, especially against the backdrop of weak economic conditions.
It said: "Moreover, the bank's ability to generate the earnings needed to replenish capital, if higher losses materialise, is diminished by its slow progress in realising merger-related revenue and cost benefits."It said: "Moreover, the bank's ability to generate the earnings needed to replenish capital, if higher losses materialise, is diminished by its slow progress in realising merger-related revenue and cost benefits."
There has been speculation that the Co-operative faces a £1bn shortfall in its capital position, which it is tackling by disposing of assets, such as its life and general insurance businesses. It cannot issue shares to boost its funds, but could sell assets such as its general insurance operation.There has been speculation that the Co-operative faces a £1bn shortfall in its capital position, which it is tackling by disposing of assets, such as its life and general insurance businesses. It cannot issue shares to boost its funds, but could sell assets such as its general insurance operation.
At the start of the year the Co-operative had a core tier one capital ratio of 9.2% – a key measure of financial strength – but regulators are forcing UK banks to hold more cash as a buffer against future crises.At the start of the year the Co-operative had a core tier one capital ratio of 9.2% – a key measure of financial strength – but regulators are forcing UK banks to hold more cash as a buffer against future crises.
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