TROUBLED Co-operative Bank is “confident” it will raise the £400 million needed to secure its future, even though it will not turn a profit until 2016 at the earliest.
Chief executive Niall Booker said the bank, which yesterday confirmed losses of nearly £1.3 billion in 2013, expects to raise the additional cash even if its embattled parent does not put in its share.
Co-operative Group, which now owns 30 per cent of the bank, would be liable for a further £120m.
“I’m confident we’ll raise the £400m even if the group does not participate,” Booker said. “Shareholders are very, very supportive and I really, really think that we’re going to get this through the gate.”
The bank is majority-owned by a group of bondholders which took control in December following revelations of a £1.5bn black hole in its finances. They are thought to have little choice but to come up with the money or lose the roughly £1.2bn they have already put in.
Booker, who will receive at least £4.6m for his first 18 months as chief executive, said he spoke to acting Co-op Group boss Richard Pennycook on Thursday about various matters. However, there was no confirmation as to whether the group will stump up its share of the cash call.
“It’s a decision for them,” Booker said. “What I can say is they are supportive of the quantum and the need for the bank to raise this amount of capital.”
Details of the banking chief’s pay package raised eyebrows yesterday despite efforts to tie Booker’s remuneration to the bank’s survival. It includes £1.7m for the June-to-December period last year, a base salary of £1.2m for 2014, and a further £1.7m linked to the health of the bank’s capital position.
Richard Pym, the bank’s chairman, said he realised such levels of remuneration would “cause concern”, but it was “important to remember that the state the bank is in has nothing to do with the present management team”.
The mutual has scrapped nearly £5m in deferred payments owed to current and past executives, including former chief executive Neville Richardson.The Co-operative Group, which still owes the bank £263m as part of the original bailout, has meanwhile had to grapple with its own difficulties stemming from the bank’s near-collapse.
These intensified earlier this week with the resignation of former City minister Lord Myners, whose efforts to overhaul the group’s governance systems were opposed by some internally.
John Gorl of trade union Usdaw, which represents some 50,000 workers across the group’s retail, distribution, funeral care and pharmacy operations, said the problems at the bank had been a “real concern” for some time. Instability within the board of the main group is further stoking concerns.
“While there will be no quick fix for the problems at the group there is a growing anxiety with our membership over long-term job security going forward,” Gorl added. “The Co-op needs to present a clear and coherent strategy for the future as soon as possible to help address our members’ concerns.”
Charlotte Webster, campaign director, Move Your Money, said: “The bank’s losses confirm our fears for the organisation; yet their decision to cut remuneration for former executives demonstrates a consciousness rarely witnessed from big banking.”