Bruised Co-op working on new group plan
THE CO-OPERATIVE Group’s board is now scrutinising the profitability of all parts of the business, and expects to unveil a new strategy in May.
Yesterday it announced a series of cost-cutting measures at the Co-op Bank as part of a four to five-year turnaround plan which will include closing 50 of the 324 branches and an undisclosed number of corporate banking centres.
After announcing the £1.5bn rescue deal, group chief executive Euan Sutherland admitted it had put “stress” on the wider business and said the board was looking at the level of returns across the group.
The group has agreed to commit £462m as part of the rescue plan but he said the original proposal, to put in around £1bn, would have had greater consequences.
He said: “We’ve had extra scrutiny on the whole capital spend and what the returns are right across the business as well as the investment in the bank. It does put stress on our business but not nearly as much as it would’ve done if we had put in £1bn under the original plan. The food business, for example, its investment programme is fully supported over and above what we’re talking about today.”
He added: “We’re prioritising our whole portfolio into businesses which have the greatest returns.”
The Co-op’s original strategy involved raising £500m from asset sales, £500m from the Co-op Group and by forcing £500m of losses on the £1.3bn of subordinated bondholders.
They were not willing to shoulder these losses and fought for a a debt-for-equity swap which has left the Co-op Group with 30%. While some of the bonds are held by small investors much of the opposition was led by the US hedge funds, Silver Point and Aurelius which now hold around 35%.
When asked if there would be a ban on bonuses across the group due to the situation with the bank, Mr Sutherland refused to be drawn.
He said: “At the Co-op group we’ve clearly had a severe stress on the bank and that will be our focus. In funerals, which is doing well, it would seem fair to reward people for their efforts there. It’s a decision we’ll take at the end of the year.”
Mr Sutherland added: “I’ve said sorry a number of times and I’m happy to say it again. This has been a terrible situation which we’ve picked up and been dedicated to sorting out night and day during the past six months.”
Much was made yesterday of the Co-op Bank’s dedication to its ethical values which will be written into its constitution. It will only be able to use the Co-operative name if it keeps an ethical stance that will be overseen by an independent director who will chair an ethics and values committee.
