24th March 2014
Beleaguered bank the Co-op is to go cap-in-hand to investors to raise some £400m in a bid to ensure it does not break capital adequacy requirements writes Philip Scott.
The group, which endured a downgrade from ratings agency Fitch last year from B to –B, is set to publish its full year results by 8 April.
The new executive team brought in only nine months ago has been reviewing the bank’s fiscal position and have been, according to chief executive Niall Booker, “unearthing a range of issues”.
The group which already raised more than £1bn last year from its bondholders and its parent group now needs further funds to cope with further misconduct claims, including “technical breaches of the Consumer Credit Act”, but the biggest cost relates the mis-selling of so-called payment protection insurance (PPI).
As a result of the latest development at the bank, it said it would make a loss of £1.2bn to £1.3bn for 2013.
One off costs, and the processes associated with the separation of the Co-operative Bank from the Co-operative Group have proved more costly, more time consuming and more complex than the group originally anticipated and provisions for the estimated separation costs from group are expected to be approximately £40m for 2013.
Booker added that “the starting capital position of the bank for the four to five year recovery period is weaker than in the plan announced last year”. He said: “The proposed capital raise would enable us to reset this starting point and continue with the execution of our original business plan.”