The troubled bank’s update comes ahead of the publication of full accounts next month, which is expected to reveal losses of £1.2bn to £1.3bn for 2013.
According to the report, the bank needs to raise an extra £400m to restore its core tier-one capital ratio closer to 9 per cent.
A liability exercise discovered “conduct and legal documentation issues that included legacy payment protection insurance liabilities and technical breaches of the Consumer Credit Act.”
These costs also include a £40m one-off cost associated with the separation of the Co-op Bank and Co-operative Group that brought the bank’s core tier-one ratio down to 7.2 per cent for 2013.
The bank is using UBS Investment Bank to help with the planned capital raising. The regulatory minimum core tier-one capital requirement is 7 per cent.
Co-op Bank chief executive Niall Booker said the cash injection, in addition to a £263m contribution from the Co-op Group later this year, would enable the bank to “continue with the execution of our business plan”.
He added: “We have started to simplify the business, reduce costs and de-risk assets as we drive the change needed to return to our roots as a bank focused on retail and small business customers.”
| Independent review |
The latest bad news to envelop the bank follows the publication of a progress update by Lord Myners’ independent governance review into the Co-operative Group, published earlier this month. The 10-page report warned the Co-op Group would go bust unless it urgently reformed its board and voting structure. This followed the resignation of group chief executive Euan Sutherland, citing difficulties with an “ungovernable” board. |
Analyst View
Garry White, chief investment commentator at Edinburgh-based Charles Stanley Direct, said: “I think we’ll see an eventual split between the bank and the Co-op Group, otherwise it’s in danger of dragging the whole organisation down. These problems keep arising and they will take a long time to unpick.”
