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| Co-Op bank to raise £400m in new capital as losses grow | |
| (about 4 hours later) | |
| The Co-operative Bank is aiming raise an extra £400m by issuing new shares in a bid to strengthen its capital position. | |
| The bank also said it now expects last year’s trading loss to be between £1.2 billion and £1.3 billion, almost twice the £709 million loss it revealed for the first half. | The bank also said it now expects last year’s trading loss to be between £1.2 billion and £1.3 billion, almost twice the £709 million loss it revealed for the first half. |
| The news scuppers any plans Co-op Bank had to come to the stock market this year. It follows 12 months in which Co-operative Group had to hand control of the bank to its bondholders and the bank’s former chairman, Paul Flowers, was arrested for alleged drug dealing." | The news scuppers any plans Co-op Bank had to come to the stock market this year. It follows 12 months in which Co-operative Group had to hand control of the bank to its bondholders and the bank’s former chairman, Paul Flowers, was arrested for alleged drug dealing." |
| Chief executive Niall Booker, who joined in June last year, said the bank had identified a further £400 million of charges relating to mis-selling PPI, lapses in mortgage provision, interest rate hedging products and technical breaches of the Consumer Credit Act. | Chief executive Niall Booker, who joined in June last year, said the bank had identified a further £400 million of charges relating to mis-selling PPI, lapses in mortgage provision, interest rate hedging products and technical breaches of the Consumer Credit Act. |
| He said: “The result of providing for these items together with the cost of separation from 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. | He said: “The result of providing for these items together with the cost of separation from 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 proposed capital raise would enable us to reset this starting point and continue with the execution of our original business plan.” |
| He said the extra costs had only come to light since the bank completed its £1.5 billion refinancing in December. He added that the cost of separating the bank from Co-op Group would be around £40 million in 2013. | He said the extra costs had only come to light since the bank completed its £1.5 billion refinancing in December. He added that the cost of separating the bank from Co-op Group would be around £40 million in 2013. |
| The effect of the extra £400 million of losses will cut the bank’s key balance sheet ratio (core tier 1) from almost 9 per cent to 7.2 per cent which is only just above the minimum 7 per cent required by regulators. | The effect of the extra £400 million of losses will cut the bank’s key balance sheet ratio (core tier 1) from almost 9 per cent to 7.2 per cent which is only just above the minimum 7 per cent required by regulators. |
| Co-op Bank will turn to its new shareholders — the hedge funds and institutions which agreed to swap their bonds for equity last year — for the extra £400 million. | Co-op Bank will turn to its new shareholders — the hedge funds and institutions which agreed to swap their bonds for equity last year — for the extra £400 million. |
| It is not immediately clear whether Co-op Group, which is the largest shareholder with a 30 per cent stake, will take up its rights. It has already pledged to pump another £263 million into the bank this year as part of the original bailout. | It is not immediately clear whether Co-op Group, which is the largest shareholder with a 30 per cent stake, will take up its rights. It has already pledged to pump another £263 million into the bank this year as part of the original bailout. |
| But Co-op Group is itself in turmoil following the shock resignation of its chief executive, Euan Sutherland, earlier this month, and the publication of Lord Myners’ excoriating review of its governance and management. | But Co-op Group is itself in turmoil following the shock resignation of its chief executive, Euan Sutherland, earlier this month, and the publication of Lord Myners’ excoriating review of its governance and management. |
| It would need to put up more than £100 million extra to maintain its shareholding at 30 per cent. | It would need to put up more than £100 million extra to maintain its shareholding at 30 per cent. |
| Co-op Bank also confirmed today that it had cut 1000 jobs out of its 10,000-strong workforce and closed 30 of its branches with a further 15 to shut this year. In addition, it said that savers had stuck with the bank, with retail deposits down only 1 per cent from £28.1 billion to £27.9 billion at the end of last year. | Co-op Bank also confirmed today that it had cut 1000 jobs out of its 10,000-strong workforce and closed 30 of its branches with a further 15 to shut this year. In addition, it said that savers had stuck with the bank, with retail deposits down only 1 per cent from £28.1 billion to £27.9 billion at the end of last year. |
| Booker said the bank had seen some progress in its recovery plan. | Booker said the bank had seen some progress in its recovery plan. |