The Co-operative Bank will hold back nearly £5m in pay from former executives after it unveiled a £1.3bn loss and admitted that it would not make money for at least two years.
The move came as the bank sought to damp down controversy over the package awarded to its current chief executive, Niall Booker, which could hit a maximum of £5.8m for just 18 months’ work.
His deal includes salary and pension of £790,000, a further £943,000 of so-called “allowances” linked to the bank’s continuing survival – paid at a monthly rate of £140,000 – and a £1.2m “long-term” share package. This year’s package is worth £2.9m.
The bank’s survival is dependent on a £400m cash call on existing shareholders, who have already recapitalised the bank once. It admitted that a failure to raise the money would compromise its status as a “going concern”.
While some commentators described the bank as being on the brink, analysts from Espirito Santo said the results were in line with expectations, although they were admittedly low.
Included in the chamber of horrors were £516m of impairment charges, mostly from operations now viewed as non-core, conduct and legal charges of £412m, and IT and deferred tax writedowns of £148m and £158m respectively.
It is these issues that have contributed to the money being withheld from former bosses. Among them is Neville Richardson, former chief executive, who will miss out on £238,000. His successor, Barry Tootell, forgoes £497,500, plus £512,500 forfeited when he resigned. The second two instalments payable to former chairman Paul Flowers under a £95,000 deal agreed when he quit will be withheld.
The bank is now facing a gruelling battle to survive and admitted that a host of problems could yet knock it off course. But Mr Booker said he was confident that the rescue money could be raised. It is not yet clear whether the Co-operative group – which still owes the bank more than £250m from its earlier re- capitalisation – will participate in the cash call.
Speaking to The Independent, Mr Booker said he would be with the bank for a relatively short period to get it back on its feet and ensure that its new strategy of focusing on personal banking customers and small business in the UK was working successfully. The former HSBC banker said he had “other opportunities” when he joined and his pay was now tied to the survival of the bank. “It is a fairly short-term exercise. Once stabilised there are better and cheaper options to run the bank,” he said.
His chairman, Richard Pym, said he recognised that “ the levels of remuneration being discussed will cause concern but it is important to remember that the state the bank is in has nothing to do with the present management team. They were brought in to keep the bank alive and turn the business around.”
Mr Booker refused to comment on the bank’s relationship with the Labour Party, though it would appear to be “non-core” given the new strategy.