The Co-operative Bank has started a sale process inviting offers for all of its issued ordinary share capital.
The Bank, which used to be wholly owned by the Co-operative Group, was bailed out by US hedge funds in 2013 after needing £1.5bn. The Group maintains a 20% share of the bank.
Bank chair Dennis Holt said the organisation was continuing to meet the regulatory capital requirements set out by the Bank of England’s Prudential Regulation Authority. However, he added that the Bank needed to build capital for the future.
Since 2014 the Bank has sold over half of the original non-core portfolio and made IT improvements.
“We are now commencing a sale process, alongside other options,” said Mr Holt. “The Bank’s ethical heritage and customer proposition will be a central consideration in this.”
Chief executive Liam Coleman 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.”
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The Co-operative Bank has over four million customers across the UK and is currently the only high street bank with a customer-led ethical policy.
The Bank’s ethical policy was amended in 2015 following a consultation with 74,000 customers, colleagues and stakeholders. Around 84% of those surveyed said the Bank’s ethical policy was the main reason for banking there.
The Bank expects to report a loss for the year ending 31 December 2016, which it says it will be “significant” but lower than the loss reported in the year ending 31 December 2015.
The Bank’s board is expecting proposals for the acquisition of 100% of the share capital of the Bank.
The Co-operative Group said in a statement: “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.”
The Save Our Bank campaign, formed in 2013 to pressure the Bank into sticking to its ethical policy and return to some form of co-operative ownership, also reacted to the news.
It said: “We welcome the clear statement by the Bank that it will place its ethical heritage and customer proposition at the centre of its efforts to find new sources of capital and potential new owners.
“We welcome the bank’s stated intention to look at alternative ways to strengthen its capital position. We call on the Bank to seek co-operative sources of capital – the Bank’s own customers, or other European co-operative institutions, and to engage with customers and the Customer Union so that, in the spirit of being a customer-led bank, we have a say in what happens next.”
The campaign group, which has more than 10,000 members, added: “We call on the Co-operative Group to join with us in pressing for a new ownership structure that puts customers at the centre of the Bank’s future and helps strengthen its connection with its co-operative heritage.
“We also call on the Bank’s regulators, the Prudential Regulation Authority and the Financial Conduct Authority, to recognise the importance of co-operative models as part of a a healthy and diverse financial system, and seek ways to protect and preserve co-operative customer ownership as part of the Co-operative Bank’s proposed sale.”
Save Our Bank said its members had asked it to start the process of raising funds to buy an increased stake in the Bank.
“While this might be small in the overall scheme of things,” it added, “the fact that so many of our members and supporters have indicated a serious desire to own a stake in the bank, with the risks that entails, shows that customers could play a role. The loyalty of the bank’s customers has been a very important factor in the bank’s fortunes since 2013.
“We represent that loyalty and we intend to show how the customer voice can play a positive role in the Bank’s future.”
