Newsletter 24 March 2017
We wrote to you in January with a survey asking your views on which issues we should prioritise in 2017. Since then we’ve been a little overtaken by events, as we focused on responding to the bank’s ‘for sale’ announcement. Nonetheless we had an encouraging response to the survey, which has helped set our priorities for the year. More on this below, but first an update on recent developments at the Co-op Bank and what we are doing about it.
Co-op Bank announces losses and clarifies plans
Earlier this month the Co-op Bank announced its 2016 results, with the headline figure being a loss of £477 million. That’s the bank’s fifth year of losses in a row, although the loss is a little smaller than in 2015 and the bank continues to report progress against its turnaround plan.
The bank also made clear in its reporting that an outright sale is not the only option under consideration, stating that it will try to raise £750m from other sources if a buyer cannot be found. It’s considering options including swapping debt for equity as well as raising around £300 million in new shares. We are encouraging the bank to act like a co-operative and look to its customers to raise finance, and we hope to discuss the practicalities of this in a meeting with the bank soon.
Rumours abound on proposed sale
On the proposed sale, recent days have seen a flurry of announcements. The latest news is that the bank has announced it has received several credible offers from buyers, and has asked for expressions of interest by mid-April. TSB, Santander and Metro Bank are among those that have said they are not in the running, while the Clydesdale and Yorkshire Bank owners CYBG, as well as Virgin Money, are said to have requested access to financial information on the bank – an indication they may be considering making a bid. A “challenger bank”, OneSavings, has said it expects the sale to fall through and the bank to be broken up in some way, and the Telegraph reported the Bank of England is concerned and is drawing up contingency plans.
We can expect to learn soon whether a buyer will step in, and if so, whether it will be able to meet our demands on ethics and cooperation. If there is no buyer, the bank could seek other sources of capital, but “resolution” and break-up by the Bank of England is also a possible outcome – and could even be a positive outcome if the regulator can take steps to protect the bank’s co-operative heritage.
What we are doing about it
We want to see this sale process lead to an outcome that protects the bank’s Ethical Policy and includes a commitment to customer ownership. As well as clearly setting out what we expect from any buyer, we’re building alliances and consulting with experts to look for the best ways to make this happen. We’ve met with Co-operatives UK to discuss the sale process and how we might work together, and have contacted the Bank of England to start a dialogue. We also expect to meet with senior representatives of the Co-op Bank soon to discuss the current situation and how it will affect our members and supporters.
Some people have asked us: “why don’t you try to organise a customer buy-out?”. It’s an appealing idea – between the bank’s 1.4 million current account customers, the £750m the bank needs is only around £550 each. However, split between our 10,000 supporters, it starts to looks a little less affordable. With our limited capacities, we think our efforts are best spent using the influence we have to try to secure the best deal possible, and to persuade the bank to look to its customers to raise capital. That said, we’re happy to work together with anyone with a good plan to make this happen.
Your views on our plans for 2017
Last but certainly not least, the response of our January survey of members and supporters. Over 600 of you got in touch to have your say - a great response, considering we were overtaken by subsequent news and were not able to send a reminder email.
We asked your views on which of seven activities we should prioritise, and it’s clear from your response that there are three areas you’d like to see us focus our efforts in particular:
- Building a share fund so that the Customer Union can build a co-operatively owned shareholding in the Co-op Bank in the name of its members – 88% of you said this was either “very important” or “important”, and 46% said “very important”.
- Continue campaigning for the bank to stop short-notice closure of accounts for community and human rights groups (e.g. Palestine solidarity groups) – again, this was “very important” or “important” to 88% of you, and “very important” for 49%.
- Funding a research report to explore the best options for moving the bank back to the co-operative sector, and launch a campaign for the bank to follow its recommendations – at 91%, more of you thought this was “important” or “very important” than any of the other plans, and 48% said “very important”.
The suggestion of campaigning for the bank to raise the capital it needs from customers was also popular, while the remaining three suggested plans were rated as less important. We will set these three areas as our priorities for 2017, and keep you updated on our progress towards achieving them.
With best wishes,
The Save Our Bank team
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