Accept £1bn plan or we go bust, warns Co-op Bank as losses see group go almost £560m into the red

Co-operative Bank reports pre-tax losses of £709m in six months to end of June, wiping out profits from its supermarkets

Co-operative Bank lost a staggering £709 million in the first half of the year and today warned bondholders that if they do not approve a £1 billion raising of fresh capital later this year it would go bust.

"There is no plan B," said Co-op Group chief executive Euan Sutherland. "We are standing firmly behind the bank. Having looked at all the options, the plan we have come up with is the one which is the best interests of the greatest number of stakeholders."

He added: "We are sorry, but we are a new team grasping the nettle and getting on with fixing the problems."

Richard Pym, chairman of the bank, said that without the new capital, "we will not be a going concern".

Sutherland also warned that the future bank would be much smaller than today. He would not comment on how many of the bank's 10,000 staff will lose their jobs or how many of its 320 branches will close. He said: "It is inevitable that there will be some jobs at risk. That is the very unfortunate consequence of what we have to do."

Co-op Bank took writedowns and one-off charges totalling £740 million in the first half. These included bad loan charges of £496 million, of which three quarters is related to what it has decided is its non-core business and the rest from ongoing business.

Niall Booker, the bank's new chief executive, said the bulk of the losses came from the Co-op's ill-fated take-over of Britannia Building Society in 2009. A further £148 million writedown came as the result of scrapping a planned new IT system. That took total IT writedowns to £300 million.

Booker said this was the result of the bank's ambitious plans for growth, including the attempted purchase of 630 Lloyds branches, known as Project Verde. That collapsed earlier this year, leading to the downgrading of Co-op Bank bonds to junk and the Prudential Regulatory Authority's demand that it find an extra £1.5 billion of capital.

Other charges were £61 million for compensating customers who were mis-sold products.

Sutherland said that while the bank lost most of its wholesale and corporate deposits following the rating downgrade, its 4.7 million retail customer base had stayed "incredibly loyal".

He added that the group was still on track to publish the prospectus for its £1 billion exchange offer, which will see bondholders asked to take haircuts on their holdings and the flotation of the bank on the stock market by the end of October.

The PRA has demanded that the bank raise £1 billion by the end of this year and a further £500 million, largely from the sale of the Co-op's general insurance business, by the end of 2014.  Co-operative Group, which also includes the supermarkets and funerals businesses, had a first-half loss of £559 million.

Sutherland said he believed that eventually Co-op Bank, while being smaller, would still play a "significant role in the banking sector".

Booker said: "We have to be realistic about how much time it will take. If you look at Lloyds and Royal Bank of Scotland, they took four to five years."

Start your day with The Independent, sign up for daily news emails
Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
Sport
wimbledonScot will face Ivo Karlovic next
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test