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Co-op chief: £400m to 'reset starting point'

Co-op's Chief executive Niall Booker said the proposed £400m capital needed for its banking arm would enable to "reset this starting point" and continue with the "execution of our original business plan."

  • The bank said continuing "root and branch" reviews of processes, procedures and documentation had produced further conduct and legal issues.
  • One-off costs associated with the separation of the bank from the Co-operative Group have proved more costly, time-consuming and more complex than anticipated.
  • Its capital ratio - a measure of its financial strength - is now expected to be around 7.2%, compared with previous guidance of near 9% and against the regulatory minimum requirement of 7%.

Read: Co-op bank admits it needs another £400 million

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Co-op bank admits it needs another £400 million

The Co-op's banking arm has revealed a further setback to its recovery and has admitted it needs to raise another £400 million to cover past issues.

The business, which is set to report full-year losses of up to £1.3 billion for 2013, said the matters relate to conduct and legal documentation, such as legacy PPI business and technical breaches of the Consumer Credit Act.

Co-operative bank branch sign. Credit: John Stillwell/PA Wire/Press Association Images

The Co-op Bank is now under the control of bondholders as part of last year's refinancing to fill a £1.5 billion hole in its balance sheet.

The update means the starting capital position of the bank for its four- to five-year recovery is weaker than in the rescue plan announced last year, requiring shareholders to inject another £400 million into the business.

Co-op 'set to announce £2 billion in losses'

The Co-operative Group is set to announces losses of £2 billion in results for 2013, due next month, according to the BBC.

The group has announced it will sell off its agriculture businesses and is looking into selling some or all of its pharmacy businesses.

Read: Co-op to sell its farms and pharmacies

The Co-operative Group's farms business dates back to 1896 and covers around 50,000 acres of land in England and Scotland, growing a variety of cereals, fruit and vegetables.

The pharmacy business was established in 1945 and has felt the brunt of attempts by the Government to cut back on the cost of prescriptions.

Other businesses within the group include funeral care, legal services, travel and general insurance.

Co-op Group to sell-off farms and pharmacies

The Co-operative Group has confirmed it has started to sell-off its farms and was looking at selling part or all of its pharmacy. The company owns 14 farms and three packing sites.

Co-op Group announced it will sell off its farms and some or all of its pharmacies. Credit: Press Association

The company said the farms were "non-core" as part of a wider strategic review of all of its businesses. In a statement on its website, it said:

"[The group] has started a process that is expected to lead to a sale of the business.

"In addition, it is exploring options for the future of the Pharmacy business; this could include the sale in whole or part of the business."

The pharmacy part of the business has 750 branches and employs 6,500 staff, making it one of the UK's three largest pharmacy chains.

Co-op loses custom in wake of Paul Flowers scandal

Embattled Co-operative Bank has admitted it is losing current account customers as its reputation takes a battering following its financial woes and the scandal involving its former chairman.

The group revealed in a statement outlining technical changes to its rescue fundraising deal that "recent events" were likely to have contributed to an increase in the number of customers switching current accounts to rivals.

Former Co-op chairman Paul Flowers. Credit: Press Association

But the Co-op said savers were so far sticking with the group, with its deposits remaining stable.

The lender has been thrown into turmoil after regulators uncovered a $1.5 billion black hole in its finances and as the scandal surrounding ex-chairman Paul Flowers and his appointment refuses to die down.

Mr Flowers has been bailed after being questioned by police officers investigating allegations of drug supply offences.

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Labour finances 'secure' following Co-op loans

Labour has said its finances are on a "secure footing" following reports that it may have to pay off loans from the Co-op before the 2015 general election.

Labour has insisted its finances are on a 'secure footing' despite reports that it may have to pay off loans from the Co-op.
Labour has insisted its finances are on a 'secure footing' despite reports that it may have to pay off loans from the Co-op. Credit: PA

A report in The Sunday Telegraph claimed that the opposition party could face the prospect of paying off more than £2 million in loans from the Co-op and a sister bank when the lender is taken over in a rescue deal being put together by US hedge funds.

A Labour spokesman said: "Our loans with the Co-operative Bank and Unity Trust Bank are secured and are being repaid in accordance with formal long-term commercial agreements and the Labour Party is on a secure footing for the future."

Read: Labour acted with 'complete integrity' over Co-op bank

Co-op expected to boost bank with insurance firm sales

The Co-operative is expected to inject around £400 million into the banking business through the sale of its two insurance businesses, according to The Sunday Telegraph.

Co-op Bank branch
Co-op Group insists it will retain "effective control" of the bank as it will be its biggest single shareholder Credit: PA

But this is less than the £1 billion of capital the Co-op initially expected to pump in to meet City regulator rules to strengthen its balance sheet.

Several thousand small retail investors, who invested an average of £1,000 each in the high-yielding bonds for a steady income, are expected to be handed income-paying bonds.

This follows campaigning against the initial plan which would have given them shares in the bank.

However, the new bonds will pay a lower rate of dividend.

Co-op Bank rescue plan details to be unveiled

Details of the The Co-operative Group's plan to save its troubled banking arm will be released today.

The revised plans could involve axing around 1,000 jobs, over 10% of the banks' workforce, according to reports.

Co-op Bank branch
The Co-op has faced tough questions over the impact of the new plan on the bank's ethical values. Credit: PA

The Co-op declined to comment on the job loss plan, and it is unclear whether the final number of job losses will be released today.

It struck a deal last month to save the bank, but the move will see it hand over control to a group of powerful investors, keeping only a 30% stake.

Co-op Bank's shortcomings 'a familiar story'

Chair of the Treasury Select Committee Andrew Tyrie says the Co-op Bank's shortcomings have become 'a familiar story' in the banking world.

Being owned by a mutual, the Co-op Bank differed from most of its competitors. But on today's evidence, its shortcomings did not. A lack of personal accountability at senior levels, ineffective corporate governance and insufficient experience and expertise among those taking the decisions; this has become a familiar story.

– Andrew Tyrie, Chair of the Treasury Select Committee
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