Co-op sells 1% stake - our view

The Co-operative Group has sold its remaining stake in Co-operative Bank. Here is our view on what this means.

With the sale of the Co-operative Group’s 1% stake in the Co-operative Bank, the last remaining link between the bank and its former owner has been broken.

The re-capitalisation deal formally agreed in September provides the bank with the extra £700m it said it needed to meet regulator requirements and create a solid footing for the future. The deal also resolves the tricky problem of how to separate the liabilities for the joint Co-operative Group and Bank pension fund.

As a result of this deal, the Co-operative Group, which until late 2013 owned 100% of the bank, had its shareholding reduced to just 1%.

Following the deal the Co-operative Group announced that it had sold even this remaining1% shareholding. The £5m price tag is an interesting indicator of the market value post deal. But more importantly it is a symbolic break.  Formal links between the two organisations will continue until 2020, but this ends a story lasting 145 years - from the foundation of the bank by the CWS.

The sale has renewed calls from some for the bank to be stripped of its name - the argument being that the sale of the 1% means that no part of the bank is co-operatively owned.

Our view is that the sale in fact points to a flaw in this argument. The bank is not a co-operative now, but neither has it ever been. Before 2013 it wasn’t owned by its customers or its workers. It was an asset of the Co-operative Group that, when the time came, the last remnant could simply be sold off.

This may seem a specious argument - after all it was called the Co-operative Bank because it was owned by a co-operative. But the seven principles of the International Co-operative Alliance, universally accepted as the definition of a co-operative, make it clear that co-operatives have members, who own at least some of the assets and exercise democratic control over those assets. That was never the case with the Co-operative Bank.

If a line was crossed it was back in 2013 when the Co-operative Group lost its majority stake in the bank. The sale of 1% makes little difference. What’s more, the Customer Union owns some shares. It’s a tiny stake, but owned by a real co-operative. That too is symbolic.

The bank is arguing that what matters most is how it behaves: its application of ethics (based on co-operative values) and its support for the co-operative movement - for example its £1m funding for co-operative development.

This is a good point. But the aims of the Customer Union and the Save Our Bank Campaign are both to ensure that the bank sticks to its ethical principles, and to see an eventual return to some form of co-operative ownership and control. While it may never have been a co-operative, that doesn’t mean it can never become one.

Our view then is that the sale of the 1% is at most a symbolic change. But the Customer Union shareholding means there is still a symbolic co-operative stake in the bank, owned by customers. If we want to increase that, it’s up to us.