The Co-operative Group announced today heavy financial losses due to problems with its banking division. We answer five questions on the Co-op’s current financial woes.
What losses have the Group recorded?
The Group lost £559m in the first half of 2013, after writing off £496m in bad loans at The Co-op Bank.
These bad loans are mostly related to Britannia Building Society, which merged with the Co-op in 2009.
What other financial troubles does the Group face?
Including the write-downs, Co-op Bank alone reported a total loss of £709m.
It also faces a £1.5bn capital hole in its balance sheet. Regulators say it must fill the gap.
Were these losses anticipated?
Yes. Co-op Group chief executive, Euan Sutherland, who took over the role in May this year, said the Group faced “well-documented challenges”.
He added: “My first few months in the role have been focused on putting in place the recovery plan for the bank,” he said, but warned there were “no quick fixes”.
Niall Booker, the Co-op Bank’s chief executive added: “The underlying issues in the results today are not new.”
How does the Co-op Bank plan to plug the £1.5bn capital hole?
In June this year the bank announced it had struck an agreement with the Prudential Regulation Authority, the bank regulator, to plug the hole, which includes plans for a stock market listing, measures to raise money from bondholders and the sale of its insurance business, planned for 2014.
What are the Co-op Bank’s future plans?
According to Booker:
“We are now clearly focused on improving the capital position of the Bank… [and] at the same time, we have continued to lend, maintaining our focus on supporting our loyal customers, both in retail and through our continued focus on lending to small and medium-sized businesses.”