Co-op’s stake in bank arm to be cut

0
Have your say

The Co-op’s stake in its banking arm is to be reduced further after the troubled lender unveiled details of a £400m rescue fundraising.

The mutual currently owns 30 per cent of the bank but this will be cut because the business is not taking up all of its rights in the offer to shareholders.

The Co-op said it will still have a significant stake in the business and expects to remain the single largest shareholder.

The exact size of the Co-op’s stake will not be known until the fundraising is complete in a few days’ time.

The bank’s four other major shareholders, who include US investment firms, are taking part in the fundraising but the Co-op is buying shares using funds raised from selling some of its £120m entitlement as it looks to keep its holding above 20 per cent.

If the stake in the bank falls below 20 per cent, a guarantee that it must uphold its ethical cooperative values will no longer stand though the business can choose to keep it.

The bank, which recently reported a loss of £1.3bn for 2013, needs the additional cash from shareholders in order to cover the cost of legacy issues, such as insurance mis-selling.

Chief executive Niall Booker said the additional funds will give the bank room to begin its turnaround plan, which will see it target retail and small business customers.

He said: “The business plan is being implemented and there have been some encouraging early signs.

“We have started to simplify the business, reduce costs and de-risk the non-core assets, while remaining committed to the values and ethics that continue to set us apart.”

Mr Booker also paid tribute to chairman Richard Pym, who was brought in at the height of the bank’s financial crisis and is due to leave by the end of the year.

He said: “Richard has been instrumental in the important governance changes which have been implemented at board level and his relentless appetite to bring about change and improvement has been an inspiration to us all.”