Investments  

Will Co-op stress test concern shareholders?

The Bank of England’s is set to unveil the results of its stress test into the Co-operative Bank, a week after the beleaguered Co-operative Bank cancelled its general meeting for shareholders.

The bank was due to ask shareholders to vote on a new bonus scheme but says it includes measures which are now no longer appropriate.

It comes just days after chief executive Niall Booker said it would be “no surprise” if the firm failed a Bank of England stress test - the results of which will be published on 16 December.

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In a statement, the bank said it has cancelled the meeting to consider whether “modifications to the timing and strategies for the run-down of non-core assets, which are particularly exposed to stress, would be appropriate”.

The Co-op Bank is sitting on £6bn of largely sub-prime mortgages in a portfolio known as Optimum - large numbers of these were acquired when the bank took over Britannia in 2009.

In its statement the bank said: “Given positive developments in market pricing, it may now be possible to exit certain additional portfolios which are particularly susceptible to stress, at levels which can now be accommodated in our capital position, thereby significantly improving our resilience to a severe economic downturn.”

A new long-term incentive plan will now be drawn up and put to shareholders at the annual general meeting in April.

In the meantime the bank’s remuneration committee is considering alternatives and looking into how many outstanding obligations need to be met.

Adviser view

Danny Cox, head of financial planning at Bristol-based Hargreaves Lansdown, said: “I think the Co-op is a business which is going through a large transformation and I would hope that the worst is behind them.

“They have taken some sensible decisions in the way they have restructured their corporate governance but it is too early to say if they are on the right track.”