Co-op beefs up banking team with former Morrisons boss

The customer-owned group said Richard Pennycook will become group finance director, while Richard Pym, chairman of UK Asset Resolution (UKAR), will chair the Co-operative Banking Group, which has been under pressure over its capital strength.

The Co-op Bank was recently forced to reassure customers it does not need a Government bailout after being downgraded to junk by ratings agency Moody’s amid fears over its capital reserves.

Last month it stopped lending to new corporate customers as it seeks to repair a major hole in its finances.

Mr Pennycook was finance director of Bradford-based supermarket chain Morrisons for eight years and joins next month, initially on an interim basis.

Mr Pym, the former boss of Alliance & Leicester, joins immediately and will continue as chairman of UKAR, which holds almost £70 billion of loans made by failed lenders Bradford & Bingley and Northern Rock.

The Co-op has been under intense scrutiny after pulling out of a deal to buy more than 600 branches from Lloyds Banking Group.

Mr Pennycook and Mr Pym are the latest big-name signings by the food-to-funerals group, which last month recruited senior HSBC banker Niall Booker as chief executive of the banking arm and deputy chief executive of the wider Co-operative Group.

They also join new group chief executive Euan Sutherland, the former chief operating officer of B&Q owner Kingfisher, who took on the role last month.

Mr Pennycook said: “With its strong brand and loyal customer base, the group is ideally positioned to address the challenges it now faces.

“Together with Euan and the rest of the team, I look forward to helping the Co-operative Group realise its significant potential.”

Mr Pennycook, who lost out to Dalton Philips in the race to become chief executive of Morrisons, announced last July he was quitting the supermarket, and formally leaves this month.

Mr Pym succeeds Paul Flowers, who has chaired the Co-operative Banking Group and the Co-operative Bank for three years.

As chairman of UKAR, he spearheads the wind-down of the state’s nationalised banking assets.

Mr Pym was appointed chairman of Bradford & Bingley in 2008 after its collapse at the peak of the credit crunch.

In 2010, he was made chairman of UKAR, which brought together the bulk of the mortgage books of B&B and Northern Rock.

He was also boss of former building society Alliance & Leicester until 2007.

Mr Pym said: “We are clearly focused on actions to strengthen the bank’s balance sheet and resolving the current underlying issues. This will allow us to continue to provide customers with an alternative choice to the traditional banks.

“The British banking system is very concentrated, with a small number of institutions, and it is important that the Co-operative Bank plays its full part in maintaining a competitive landscape for customers.”

The Co-op’s 2009 rescue of Britannia, then Britain’s second-biggest building society, is widely blamed for causing its capital woes.

It inherited toxic commercial property and home loans that dragged it to losses of £662 million in 2012.

The Co-op is tackling its capital gap by disposing of assets, such as its life and general insurance businesses.

But as a member-owned institution, it is hamstrung in its ability to raise fresh capital, and cannot issue shares to boost funds.

The Co-op is expected to come up with an emergency plan to shore up its banking arm within weeks.

Reports at the weekend said the bank is considering slashing or axing income paid to junior debt-holders.

It is still in discussions with the Prudential Regulatory Authority (PRA) over the amount of extra cash it must hold as a reserve on its balance sheet, but the figure is thought to be between £1 billion and £1.8 billion.

Mr Sutherland said: “Richard Pennycook has proven long-term experience working at the top of some of Britain’s leading companies and will make a valuable addition to our organisation.

“Richard Pym is widely respected across the financial services industry. His appointment, together with that of Niall Booker as chief executive of the Co-operative Bank, means the bank is in very good hands.”

Co-op chairman Len Wardle said the Manchester-based group now has a “formidable” top team with “exceptional financial, strategic and operational expertise”.

The wider Co-operative Group was founded in 1863, has more than six million members and employs over 100,000 people.