Co-op Group to cut stake in bank in £400m cash call
THE CO-OPERATIVE Group is to cut its shareholding for the second time in six months as part of a £400m fundraising proposed by the troubled lender.
Until last year’s financial crisis at the bank – a £1.5bn capital shortfall emerged – it was a wholly-owned subsidiary and one of the jewels in the crown of the mutual.
As part of a fundraising deal to rescue the bank last year, the group was left with a 30% shareholding, which could fall to around 20% as a result of the latest cash call, according to speculation.
Due to continuing problems, ranging from IT project costs, separation from the group and PPI mis-selling compensation, the bank revealed in March it needs another £400m, which it said today would be achieved via the issue of 200 million new shares at £2 per share.
Four major shareholders have agreed to take 31% of the new shares, the bank said, but the Co-operative Group has not said how big its stake will be.
In a statement the group said: “While the size of the group’s shareholding will be reduced following the capital raising, we will retain a significant stake and expect to remain the largest single shareholder. The group remains supportive of the bank and its strategy.”
Announcing the fundraising the bank said chairman Richard Pym would be standing down later this year, and warned it still faces a “significant task” to revive the lender’s fortunes.
“However, the management team believes the turnaround plan will deliver a sustainable improvement in performance over time.”
It said the plans to list the bank on the stock market were still under consideration, but said the timing of such a process “remains uncertain” due to a number of factors, not least the conclusions of the ongoing regulatory reviews.
It said the short to medium-term outlook for the company remains “challenging” with a need to implement turnaround plan and retain the right staff.
“In parallel, the regulatory and other investigations announced in 2013 and 2014 are likely to subject the company to greater scrutiny from regulators and the media, which could cause reputational damage, significant customer and deposit attrition and potentially distract management and take resources away from the implementation of the strategy.”
Niall Booker chief executive of the bank said: “The business plan is being implemented and there have been some encouraging early signs. We have started to simplify the business, reduce costs and de-risk the non-core assets, while remaining committed to the values and ethics that continue to set us apart.
“I remain extremely grateful for the continuing support and loyalty of our customers and shareholders and would like to reassure them that the completion of this capital raising will assist the new management team in the implementation of the business plan that aims to return the bank to health over time.”
