Co-op needs £400m to cover losses
The wider Group has been mulling over selling its farming division as a way to re-coup the losses however this tactic has been questioned by some experts due to the rising prices of arable land.
Niall Booker, chief executive of Co-operative Bank, said: “As a result of this continuing review we are unearthing a range of issues which the new executive team is having to address.”
Those issues include additional costs relating to PPI mis-selling and lapses in the provision of mortgages which will leave the bank facing a loss of between £1.2bn and £1.3bn for 2013
Back in October last year it was revealed that flaws in the Co-op’s systems meant that Platform and Optimum customers were only charged interest on their first mortgage payment – meaning that further payments were higher than they should be.
And Booker also admitted that the starting capital position of the bank for the four to five year period is weaker than earlier claimed.
He said: “The proposed capital raise would enable us to reset this starting point and continue with the execution of our original business plan.”
Last year the Co-operative was forced to shed over a 1,000 staff after a £1.5bn ‘black hole’ which was discovered in the banking division.
And to make matters worse the Group recently parted ways with chief executive Euan Sutherland who resigned from the company after less than a year in the role.
But Booker said the banking division remains focussed on the task in hand and will work towards simplifying the business.
He said: “The objectives of this plan remain unchanged and there are some early indications of progress. We have started to simplify the business, reduce costs and de-risk assets as we drive the change needed to return to our roots as a bank focused on our retail and SME customers. However, there remain significant challenges ahead.”