Corporate banking and branches hit by Co-op cuts

THE Co-operative Group has suggested hundreds of jobs will be lost in its banking arm as it cuts costs and closes branches.

In a statement listing the detail of the bank’s £1.5bn rescue plan, the group said it is planning “substantial long-term cost savings” which involve stripping out layers of management and reducing the branch network and the number of corporate banking centres.

It wants to close “at least” 15% of the 324-strong branch network – around 50, and cull call centre jobs, putting an emphasis on digital and self-service banking.

It also wants to save money by fully integrating the Britannia, improving its IT systems and simplifying its services. A number was not put on the scale of potential job cuts, but reports over the weekend suggested 1,000 of the bank’s 9,000 staff could go.

The directors said the bank will not be profitable in 2013 and 2014 and “can give no assurance that the bank will generate a profit for some years thereafter”.

Last month the Co-op Group admitted it had been forced to agree a debt for equity swap with bondholders that will leave it with 30% of the bank when it floats on the stock market.

Today it said the bondholders would also put in £125m of new capital alongside £462m from the Co-op Group. It has given smaller retail investors the option of a lower annual payment in exchange for a future lump sum, or maintaining existing annual payments for 12 years without future capital.

The Co-op has promised to “legally embed” its values and ethics in the bank’s constitution and says its turnaround strategy will focus on retail and small and medium-sized business customers.

Group chief executive Euan Sutherland said: “Today we have taken a major step forward towards achieving our plan to secure the future of the bank, putting in place an agreement with a number of our leading investors on a comprehensive Plan that will raise the necessary £1.5bn of capital.

“The financial position of the Bank means that all stakeholders will have to make a contribution but in delivering this agreement we have worked hard to balance the distinct needs of all those affected. The Co-operative Group is making a very significant contribution of £462m. Key investors have also committed to put in new money and exchange their bonds predominantly for equity in the bank.”