Co-op Group reduces stake in Co-op Bank after cash call

The Co-operative Group is set to lose one of its directors on the Co-op Bank board as the bank launched its £400 million emergency cash call, reducing its stake in the troubled lender.

In a fresh blow for the Co-op Bank, which earlier this year reported a £1.44 billion trading loss for 2013, its chairman Richard Pym, announced he was stepping down less than a year after his appointment.

The capital raising will see the Co-op Group’s stake diluted from the current 30 per cent to below the 25 per cent level, under which it is entitled to only one director. It currently sends two directors to bank board meetings.

The financial problems of the Co-op Group, whose governance was lambasted as “dysfunctional” this week by former City minister Lord Myners, mean it is having to pay for some of the discounted new shares in the bank that it is entitled to buy through selling others, known as “tail-swallowing”.

Four major investors, including hedge funds Perry Capital and Silver Point, accounting for 31 per cent of the shares, have committed to taking up their allocations of new stock. The bank revealed it needed to raise the money in March, blaming the cost of payment protection insurance mis-selling and the need for more provisioning.

Chief executive Niall Booker said it would ensure the bank could return to health. “The business plan is being implemented and there have been some encouraging early signs,” he said.

“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.” But his fellow directors will have to find a chairman who can command the confidence of investors and the City watchdog.

Pym is believed to feel that the job of turning around the bank is largely complete. Sources close to the bank indicated he has been offered a new role “in public service” but not in the public sector. He is also the chairman of UK Asset Resolution, the taxpayer-backed bad bank.

The fall in the Co-op Group’s stake is not expected to affect the bank’s right to use the Co-operative name. The group and bank retain an association agreement, and the group could only take back the title through buying it out.

However, business secretary Vince Cable could in theory remove the right to use Co-operative now the bank is now longer co-operatively owned.

PROMOTED VIDEO
News
ebooksNow available in paperback
Sport
Diego Costa, Ross Barkley, Arsene Wenger, Brendan Rodgers, Alan Pardew and Christian Eriksen
footballRodgers is right to be looking over his shoulder, while something must be done about diving
News
The illusionist believes hypnotism helped him to deal with the lack of control he felt growing up
people'It’s not that people react badly to it – they really don't care'
News
i100
Life and Style
tech
Life and Style
gaming
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

Ashdown Group: PR, Marketing & Events Executive - Southwark, London - £35,000

£30000 - £35000 per annum + benefits: Ashdown Group: PR Marketing & Events Exe...

Selby Jennings: C++ Developer – Hedge Fund – New York

$80000 - $110000 per annum, Benefits: Bonus and Employee Investment Scheme: Se...

Selby Jennings: Java Developer Enterprise Specialist –Paris,France

€30000 - €50000 per annum, Benefits: Competitive Bonus: Selby Jennings: Java D...

Selby Jennings: QA Engineer Lead – Hedge Fund – Chicago

$60000 - $90000 per annum, Benefits: Competitive Bonus and Employee Investment ...

Day In a Page

In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible