Concerns over the future of the Co-operative Group’s banking business sparked by the collapse of a deal to take over 600-plus Lloyds branches will cast a long shadow over the mutual’s AGM today.
It will be the first time members have had the chance to confront new group chief executive Euan Sutherland, the former chief operating officer of retailer Kingfisher, who has no formal experience of banking. Sutherland, who takes over from Peter Marks, retiring after 40 years in the co-operative movement, is also set to be grilled at the Manchester AGM on the recent downgrade to “junk status” of the Co-operative Bank’s debt by Moody’s ratings agency.
Moody’s slashed the rating because of its concerns over costs linked to the mutual’s takeover of Britannia Building Society in 2009. The agency was also concerned about the Co-op Bank’s bad and doubtful debts because of a deteriorating commercial property book.
The downgrade forced the Co-op to reassure customers on its finances, with the bank saying: “We haven’t sought, nor do we need, government support.”
However, the downgrade precipitated the abrupt departure of Co-op Bank boss Barry Tootell earlier this month.
Marks had been group chief executive during a period of rapid expansion for the mutual, including the acquisitions of Somerfield supermarket group and Britannia.
However, the Co-op plunged to a £599 million statutory loss in 2012, from a £373m profit in 2011. Analysts said that, as a mutual, the Co-op is hamstrung in its ability to raise fresh capital, unlike publicly quoted banks which can issue shares to boost funds.
There has been speculation that the Co-op faces a £1 billion shortfall in its capital position.