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.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
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: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific