The losses contributed to a wider loss for the Co-operative Group of £559m with £496m of bad loans being written off.
The bank recently announced it was attempting to restructure in the wake of its well-publicised crisis earlier this year which revealed a £1.5bn capital shortfall.
According to the results, the bank plans debt restructuring that could see bondholders having to contribute up to £500m, after the bank’s aborted attempt to buy up to 600 Lloyds Banking Group branches.
As part of the restructuring, the bank will be floated on the stock market and bondholders could potentially lose up to 30 per cent of the value of their investments in return for a minority stake in the recapitalised bank.
Euan Sutherland, group chief executive of the Co-operative Group, described the first half of the year as “very difficult”. He added: “The results underline the need for the £1.5bn capital action plan we announced in June to stabilise the bank, which remains on track.”
He warned that the bank would not remain a “going concern” if the restructuring did not take place.
However the leader of a consumer campaign to protect the interests of bondholders has criticised the restructuring plans.
Mark Taber, a Bristol-based professional investor who is spearheading the campaign, said the bank had “still not made any promises” about financial advice for bondholders ahead of the restructuring. He added that many of them were elderly and relied on income from their bonds.
He also said that the bank would not be profitable for some years, wiping out any prospect of a dividend on ordinary shares once the bank was floated, leaving the shares unsuitable for the bank’s thousands of pensioner investors.
| Background |
Lord Myners, Labour peer and former commercial secretary to the Treasury, has questioned the lack of regulatory intervention at the bank in the months leading up to its descent into crisis. Addressing the House of Lords before the summer recess, he said the absence of warnings from the FSA or the Bank of England was in sharp contrast to their concerns about shortfalls at Barclays and Nationwide. He also asked his Conservative opposite number Lord Deighton if directors of the Co-operative Group or Co-operative Bank would be investigated by the government on the crisis. |
