Co-Op Bank up for sale
Since we began work on the Bank's turnaround, the Board has always been clear that we would need to build capital for the future.
Co-Operative Bank has announced that it is commencing a sale process after making "considerable progress" in delivering a turnaround plan since 2013 when the Bank almost collapsed.
In a statement, the Board said the sale was "something always considered a potential outcome of the turnaround plan" and is now inviting offers for all of the issued ordinary share capital of the Bank.
It is also considering ways to raise equity capital from existing and new capital providers and a potential liability management exercise of its outstanding public debt.
Although it meets its Pillar 1 regulatory capital requirements and expects to continue to do so, Co-Op Bank admitted it needs to build its capital and meet longer term UK bank regulatory capital requirements.
The Bank says "its capacity to do so organically has been constrained by the impact of interest rates that are lower than previously forecast, reducing the Bank's ability to generate income, and by higher than anticipated transformation and conduct remediation costs".
Co-Op expects to report a "significant loss" for the year ending 31 December 2016, driven largely by continued high remediation and strategic project costs, including charges associated with the mortgage outsourcing programme.
Dennis Holt, Chairman, said: "The Bank has met its Pillar 1 regulatory capital requirements continuously since 2014 and expects to continue to do so. At the same time, since we began work on the Bank's turnaround, the Board has always been clear that we would need to build capital for the future. We are now commencing a sale process, alongside other options. The Bank's ethical heritage and customer proposition will be a central consideration in this."
Liam Coleman, Chief Executive Officer, added: "Since 2013, we have successfully addressed significant legacy issues, reduced the cost base and rebuilt our franchise and customer proposition. The Co-operative Bank delivers an attractive banking proposition that is differentiated by our values and ethics and is highly valued by our 4 million customers. Customers value The Co-operative Bank and our ethical brand is a point of difference that sets us apart in the market.
"While our plan has been impacted by lower for longer interest rates, the costs associated with the sheer scale of the transformation and the legacy issues we faced in 2013, there is considerable potential to build the Bank's retail franchise further using the strength of the brand, its reputation for strong customer service and distinctive ethical position."
The Co-op Group commented: "As a minority investor in The Co-operative Bank, the Co-op Group is supportive of the plan to find the Bank a new home. We will continue to work with the Bank and other investors through the process. We are focused on finding the best outcome for our members, two million of whom are Bank customers, as well as the members of our shared pension scheme which is well funded and supported by the Group. Our goal is to ensure the continued provision of the type of co-operative banking products our members want."