The boss of the Co-op Bank insisted “confident” that it can raise the £400 million of fresh capital it needs from shareholders, even if Co-operative Group does not stump up its £120 million share of the rights issue.
The fund-raising, announced last month, follows last year’s £1.5 billion refinancing, which saw hedge funds and institutional bondholders wrest 70% of the bank from the group.
Today the bank said if it did not get the extra cash it would breach regulator capital rules.
Niall Booker, chief executive of Co-op Bank, said: “We are confident that we will raise that £400 million even if the Co-op Group does not participate. They, and the majority of our shareholders, are supportive of both the quantum and the need to raise this capital. I spoke to Richard Pennycook [acting chief executive of Co-op Group] as recently as yesterday.”
Co-op Group, which has been rocked by the resignation of its chief executive, Euan Sutherland, and senior director, Lord Myners, still owes the bank £263 million from the first bail-out, which Booker said it was “contractually obliged” to pay, and could choose to take up all, part or none of its share of the rights issue. That could cut its current 30% stake further.
The bank today said it lost £1.3 billion last year which included bad debt write-offs largely from its takeover of the Britannia of £516 million, mis-selling and legal costs of £412 million, and IT write downs of £148 million. On top of that, costs and tax charges for coming out of Co-op Group were £96 million.
Booker, formerly of HSBC, could earn up to £2.9 million in pay and share awards for last year since he joined in June, and up to £5.8 million for the 18 months to the end of this year. He said he expected to hand over as chief executive “once the bank is stabilised”. He added: “At that stage it will not require the cost base of the individuals, not including myself, with the necessary skill base currently needed to manage it.”
Chairman Richard Pym said: “I recognise that for many customers and colleagues 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 over the longer term; they are therefore not being paid for past failures.”
The bank said it will claw back £5 million in bonuses and deferred share awards from former directors and executives, including £95,000 promised to former chairman Paul Flowers, who was subsequently accused of drug offences.
It also said a planned flotation on the stock market was likely to be delayed because of the large number of investigations being held into its past.