Bank claims it is on course to raise £400m more - but Co-op Group share will fall
The Co-operative Bank has announced today (9 May) that it will raise £400m through an issue of new shares. It says it is confident of reaching its target given commitments from its 5 largest shareholders, including The Co-operative Group.
In a separate release The Co-operative Group confirmed that it would participate. As expected however it will not be buying enough shares to maintain its overall shareholding at 30%. Media reports have indicated that it will fall to just over 20% - the minimum amount needed to retain significant control of the Bank, such as the ability to nominate one of its directors.
If the bank is successful then this will be a reassuring signal to customers that the bank’s finances are now under control. However the fall in the share held by The Co-operative Group is a disappointment for Save Our Bank supporters. We want to see the bank move back, eventually, towards some kind of co-operative control. But it is predictable given the state of the Group’s finances. We have called on the bank to give customers the opportunity to buy shares, and for long term responsible investors who back the bank’s ethical stance to be prioritised over short-termist hedge funds.
The Kelly Review: “sorry story” of Britannia merger which should never have happened
Last week saw the release of the final report from the independent Kelly Review into how the Co-op Bank ended up with a £1.5 billion hole in its balance sheet. The report, paid for (at a cost of £4.4 million) by the bank and The Co-operative Group, concluded that the merger of the bank with Britannia Building Society in 2009 should never have happened, and was scathing in its criticisms of the bank’s top managers and the boards of both the bank and group.
The report talked of systemic failings including a culture of accepting “mediocrity”, poor accounting practices, a disastrous attempted IT systems upgrade, and large-scale miss-selling of payment protection insurance (PPI) - "a disappointing outcome for an avowedly ethical bank".
The bank’s reaction
The bank responded with a video message from the CEO, Niall Booker, “broadly accepting” the report’s findings and apologising for the extent of the failings. Booker admitted the bank had “lost its way” but said “it is important to remember that the report is about the problems of the past.”
He also stressed the upcoming consultation on ethics, saying: “We know our customers joined the Bank for its ethics and values, and saw those as a distinguishing features. Despite the issues we've had we are focused on refreshing our values and ethics, and we intend to talk to you, our customers, in the next few months with our proposals for doing just that.”
Where does this leave the Save Our Bank Campaign?
The bank is positioning the consultation to “refresh its values and ethics” as a key part of its efforts to repair its reputation. This started out as purely a consultation on the bank’s Ethical Policy, but now it is being described much more broadly. If we are united then Save Our Bank – representing thousands of bank customers - will be crucial in influencing how this goes.
Our main aims remain as they have always been – to make sure the bank sticks to its Ethical Policy on the types of businesses it finances, and ultimately to return the bank to co-operative ownership. But clearly there is more to being an “ethical bank” than where the bank invests. The more we find out about problems at the bank – past and present – the more we need to make additional demands.
It is vitally important that this “refresh” doesn’t lead to a weakening of the bank’s Ethical Policy. If it does, we’ll leave. But we’re also calling on the bank to take an ethical position on pay and bonuses – and for Niall Booker not to accept the £1.7 million bonus he’s been offered if he hits his targets. And we want the bank to show how it can be ethical in its treatment of customers and staff.
We are taking the message to the bank
We have been speaking to representatives of the Co-op Bank and putting our demands to them, on your behalf. We know that our messages are reaching the bank’s senior management. We don’t know yet whether they will listen to those messages, but the upcoming consultation will be telling.
We need to get louder in the coming weeks, and we’ll be making sure our demands are made publicly, loud and clear.
Help us keep the pressure on
If you're a social media user then please contact the bank:
Tweet now to lobby the bank:
Niall Booker @CoopBankPR – you said #Coopbank will "refresh values and ethics" - make sure "refresh" doesn't mean "water down". #SaveOurBank
With best wishes,
The Save Our Bank campaign team