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| Co-op boss in line for £4.6m as bank losses hit £1.3bn | Co-op boss in line for £4.6m as bank losses hit £1.3bn |
| (about 1 hour later) | |
| The banker brought into salvage the Co-operative Bank was paid £1.7m in 2013 - a year in which the troubled bank revealed on Friday it had lost £1.3bn. | |
| Chief executive Niall Booker, a veteran banker who had spent much of his career at HSBC, will be paid another £2.9m this year, provided he can turn the troubled bank around. This includes a £1.2m salary plus £1.7m which will be paid in quarterly instalments provided the bank's financial position improves. This means that Booker is in line for a total of £4.6m in just 18 months. Payments of £5m to former executives are being withheld. | |
| Booker apologised to customers for the series of problems that have engulfed the bank, including the discovery of a £1.5bn capital shortfall and the arrest of the bank's former chairman Paul Flowers in a drugs scandal. Booker said he recognised his pay package appeared to be a very large sum and insisted it was tied to his turnaround strategy for the bank rather than a guaranteed payment. | Booker apologised to customers for the series of problems that have engulfed the bank, including the discovery of a £1.5bn capital shortfall and the arrest of the bank's former chairman Paul Flowers in a drugs scandal. Booker said he recognised his pay package appeared to be a very large sum and insisted it was tied to his turnaround strategy for the bank rather than a guaranteed payment. |
| Booker was a key part of the management team hired by Euan Sutherland, the boss of the Co-op Group who quit last month after details of his £6.6m two year pay deal were leaked. Booker said: "We appreciate that customers and other stakeholders continue to feel angry about how past failings placed the futures of the business so seriously at risk. I would like to apologise to them, to thank them for their continued loyalty and to thank colleagues for their commitment during such difficult times". | Booker was a key part of the management team hired by Euan Sutherland, the boss of the Co-op Group who quit last month after details of his £6.6m two year pay deal were leaked. Booker said: "We appreciate that customers and other stakeholders continue to feel angry about how past failings placed the futures of the business so seriously at risk. I would like to apologise to them, to thank them for their continued loyalty and to thank colleagues for their commitment during such difficult times". |
| But he said the bank, which is now just 30% owned by the Co-op Group of supermarkets, funeral homes and pharmacies, was making progress as a result of the fundraising. | But he said the bank, which is now just 30% owned by the Co-op Group of supermarkets, funeral homes and pharmacies, was making progress as a result of the fundraising. |
| The 30% stake could fall further if the debt-laden Group fails to support a new £400m cash call, which Booker said is needed to cover the cost of new claims from customers for mis-selling financial products. | The 30% stake could fall further if the debt-laden Group fails to support a new £400m cash call, which Booker said is needed to cover the cost of new claims from customers for mis-selling financial products. |
| "The results today reflect the magnitude of the issues that have come to light since I joined the bank 10 months ago," Booker said. | "The results today reflect the magnitude of the issues that have come to light since I joined the bank 10 months ago," Booker said. |
| "During 2013 the task for the new management was to keep the bank alive," he said, adding: "We remain enthusiastic about the long-term potential for the bank". | "During 2013 the task for the new management was to keep the bank alive," he said, adding: "We remain enthusiastic about the long-term potential for the bank". |
| He said the bank was focused on its ethical stance, having had the principles written into its constitution at the time of the rescue by bondholders. | |
| Richard Pym, the former Alliance & Leicester boss brought in as chairman last year, defended the pay deal, which has been renegotiated to be linked to performance. "Tying a significant proportion of the packages to the bank's survival is particularly important given the capital position of the bank on he arrival of the new executive team," Pym said. | |
| "Subsequent to Niall's recruitment he and the bank board renegotiated the package to move away from guaranteed bonuses to a new quarterly payment conditional upon the maintenance of regulatory capital levels in the bank. In doing so, we have tried to address the concerns of customers by tying remuneration closely to the survival of the bank," he said. | |
| If the bank had not been able to raise £1.5bn from its bondholders - known as a liability management exercise - it would have been pushed into the Bank of England's rescue scheme and might have needed help from the taxpayer. | |
| If the impact of that fundraising is taken into account, losses for the bank last year fall to £586m. The £1.3bn of losses are caused by a variety factors, including £516m of bad debts, £412m for mis-selling, a tax write down of £158m and costs of separating from the Group of £39m. | If the impact of that fundraising is taken into account, losses for the bank last year fall to £586m. The £1.3bn of losses are caused by a variety factors, including £516m of bad debts, £412m for mis-selling, a tax write down of £158m and costs of separating from the Group of £39m. |
| Booker said he had spoken to Richard Pennycook, the stand-in boss of the Co-op Group, on Thursday but did not disclose if the debt-laden business intended to stump up the £120m that it would need to inject into the bank to maintain its 30% stake in the latest fundraising. | |
| The bank, which is facing investigation by City regulators, will not make a profit for the next two years and admitted it risked breaching its capital requirements. | |
| But Booker said: "I really really think we are going to get this capital through the gate". | |
| He said he had "committed to stay until it stabilises" when he expected to hand over to a new, cheaper management team running a smaller bank focused on retail and small business banking. | |
| As part of a simplification of the bank, it will be pulling out of banking to larger companies and organisations with more complex banking. It is exiting Jersey and Guernsey and trying to sell its stake in the trade union bank Unity. | |
| Another 44 branches are to close, on top of 50 last year - a stark contrast to the strategy of the previous mangement which had been trying to buy 632 branches from Lloyds. Some 1,000 jobs were lost year. | |
| "The bank's rehabilitation won't be easy but our objectives remain unchanged," said Booker. |