This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/business/2014/apr/11/co-op-boss-pay-losses-niall-booker

The article has changed 5 times. There is an RSS feed of changes available.

Version 3 Version 4
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 7 hours later)
The banker brought in to salvage the Co-operative Bank received £1.7m in 2013 – a year in which the troubled bank revealed on Friday it had lost £1.3bn. The banker brought in to salvage the Co-operative Bank received £1.7m in 2013, the troubled bank revealed on Friday as it reported hefty losses and kicked started a £400m fundraising to bolster its financial position.
Chief executive Niall Booker, a veteran banker who 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 if the bank's financial position improves. As a result he could earn as much as £4.6m in just 18 months. In addition he was awarded £1.2m through a long-term incentive plan which could pay out in 2015. The bank's annual report and accounts, issued on Friday, after two delays, showed a £1.3bn loss and contained a "going concern" warning from its auditors, KPMG, to demonstrate the importance of raising the extra cash.
Payments of £5m to former executives are being withheld. The accounts are not qualified – which would set alarm bells ringing – but emphasise the importance of the turnaround strategy being put in place by new chief executive Niall Booker.
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. The bank is continuing to pursue the Methodist minister for £31,000 he was handed after he left. As he issued an apology to customers for the string of scandals to hit the bank, Booker said he was confident the extra money would be found after discussions with shareholders, including the Co-operative Group and the bondholders which backed last year's £1.5bn fund raising.
Booker said he recognised his pay package appeared to be very large and insisted it was tied to his turnaround strategy for the bank rather than a guaranteed payment. "I really, really think we are going to get this capital through the gate," said Booker, who was parachuted in last June as part a new team assembled 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 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." "We remain enthusiastic about the long-term potential for the bank," said Booker, who stressed its emphasis remained on an ethical stance, having had the principles written into its constitution at the time of last year's historic rescue deal.
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. "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," he said. New customers being attracted by a new current account, he said.
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. Booker could be paid another £2.9m this year, provided the bank does not breach capital rules. The sum includes a £1.2m salary plus £1.7m – the equivalent of £140,000 a month – which will be paid in quarterly instalments if the bank's financial position improves. As a result he could earn as much as £4.6m in just 18 months. In addition he was awarded £1.2m through a long-term incentive plan which could pay out in 2015.
"The results today reflect the magnitude of the issues that have come to light since I joined the bank 10 months ago," Booker said. A veteran banker credited with pulling off last year's rescue without taxpayer funds, Booker is entitled to £140,000 a month on top of his salary until June 2015.
"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." Payments of £5m to up to 43 former and current of its senior staff are being withheld and the former bank chairman Paul Flowers – facing allegations of buying illegal drugs – still being pursued for £31,000 he was handed when he left last May.
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. Booker recognised his pay package appeared to be very large and insisted it was tied to his turnaround strategy for the bank rather than a guaranteed payment. He is pulling out of lending to big businesses, housing associations and overseas ventures to focus on high street banking and small business banking although will close another 44 branches this year.
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 the arrival of the new executive team," said Pym, who is receiving a £180,000 annual fee and demanding that corporate donations of £20,000 are made to the University of Warwick and £100,000 a year to High Barnet Bapist Church. He has "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.
The bank, is now just 30% owned by the troubled Co-op Group of supermarkets, funeral homes and pharmacies, after last year's fundraising which was also too include a stock market listing, the timing of which is uncertain because of the string of regulatory issues facing the bank.
Even if the Co-op Group does not find another £120m to take up its share of the £400m cash call, Booker said he was confident other investors would step forward.
Richard Pym, the former Alliance & Leicester boss brought in as chairman last year, defended the pay deal. "Tying a significant proportion of the packages to the bank's survival is particularly important given the capital position of the bank on the arrival of the new executive team," said Pym, who is receiving a £180,000 annual fee and requested that corporate donations of £20,000 are made to the University of Warwick and £100,000 a year to High Barnet Bapist Church.
"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."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 last year's £1.5bn fundraising is taken into account, losses for the bank last year fall to £586m. The £1.3bn of losses are caused by a variety of 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 of 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 admits 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 management 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.