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Where exactly has Co-op gone wrong? Where exactly has the Co-op gone wrong?
(35 minutes later)
Sub-prime mortgages The homebuyer has stopped paying, buy-to-let loans gone sour, lending to office developments that have failed to find tenants, compensation for PPI misselling and loans to football clubs now in default are behind the record £1.3bn loss at the Co-operative Bank.Sub-prime mortgages The homebuyer has stopped paying, buy-to-let loans gone sour, lending to office developments that have failed to find tenants, compensation for PPI misselling and loans to football clubs now in default are behind the record £1.3bn loss at the Co-operative Bank.
Mortgages Fewer than one in a hundred of Co-op's £15.5bn of mainstream mortgages are in serious arrears, in line with the rest of the industry. The problem lies with the £7bn of mortgages in a vehicle called Optimum. These are sub-prime, self-certified and buy-to-let loans arranged through brokers before 2009, many of which became part of the Co-op when it took over Britannia building society. One in six are in arrears, and £1bn-worth of the loans are bigger than the value of the properties they are secured against. Co-op said a total of £1bn of Optimum mortgages had a loan-to-value of more than 100%, while a further £1.4bn were between 90% and 100%. Over the year it recorded a loss of £60m on the loans, plus a £10m for its Illius book of already repossessed properties.Mortgages Fewer than one in a hundred of Co-op's £15.5bn of mainstream mortgages are in serious arrears, in line with the rest of the industry. The problem lies with the £7bn of mortgages in a vehicle called Optimum. These are sub-prime, self-certified and buy-to-let loans arranged through brokers before 2009, many of which became part of the Co-op when it took over Britannia building society. One in six are in arrears, and £1bn-worth of the loans are bigger than the value of the properties they are secured against. Co-op said a total of £1bn of Optimum mortgages had a loan-to-value of more than 100%, while a further £1.4bn were between 90% and 100%. Over the year it recorded a loss of £60m on the loans, plus a £10m for its Illius book of already repossessed properties.
Corporate loans The financial damage caused by commercial lending to property firms and construction companies is far worse than caused by mortgage lending. Of the £2.2bn in loans the Co-op extended for commercial investment (such as offices and shops), £1.2bn is in default. The bank has lent a further £294m for residential construction, of which £127m is in default. In total, the corporate portfolio lost £447m in 2013, compared with £394m the year before. Co-op will not say which developments have defaulted.Corporate loans The financial damage caused by commercial lending to property firms and construction companies is far worse than caused by mortgage lending. Of the £2.2bn in loans the Co-op extended for commercial investment (such as offices and shops), £1.2bn is in default. The bank has lent a further £294m for residential construction, of which £127m is in default. In total, the corporate portfolio lost £447m in 2013, compared with £394m the year before. Co-op will not say which developments have defaulted.
Football clubs The Co-op has lending of nearly £50m to football clubs, and £16m is in default.Football clubs The Co-op has lending of nearly £50m to football clubs, and £16m is in default.
PPI mis-selling The bank said it paid out £103m on PPI claims during the year, down from £150m the year before, taking its total provision for misselling to £347m. It is dealing with 72,000 inbound valid complaints and contacting a further 27,000 people who may be due compensation. The average payout to customers mis-sold PPI is £3,011.PPI mis-selling The bank said it paid out £103m on PPI claims during the year, down from £150m the year before, taking its total provision for misselling to £347m. It is dealing with 72,000 inbound valid complaints and contacting a further 27,000 people who may be due compensation. The average payout to customers mis-sold PPI is £3,011.
Loan blunders Co-op said it has to pay about £110m to customers where the bank failed to give them proper information about their loan agreement, such as wrongly worded arrears notices. For many it will be an unexpected windfall, as the error is mostly hidden in incorrect documenation.Loan blunders Co-op said it has to pay about £110m to customers where the bank failed to give them proper information about their loan agreement, such as wrongly worded arrears notices. For many it will be an unexpected windfall, as the error is mostly hidden in incorrect documenation.
Interest rate swaps The bank will pay out £33m for its part in the misselling of complex swaps products to small businesses that left many with huge increases in their bills.Interest rate swaps The bank will pay out £33m for its part in the misselling of complex swaps products to small businesses that left many with huge increases in their bills.