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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 7 hours later) | |
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. | |
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. | |
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. | |
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. | |
"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 | |
"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. | |
"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. | |
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. | |
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. | |
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. | |
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. | |
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 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. | |