Don’t believe the name or the hype. The Co-operative Bank is neither a true co-operative or ethical.
It may adorn its annual report with bromides about being ‘proud of its roots in the co-operative movement’ and pledges to support Britain’s social enterprise culture, but both statements are hooey.
Ownership at present is shared between the Co-operative Banking Group (part of the broader Co-operative movement) and a bunch of hedge funds. But the main interest of the owners at present is to sell or give it away.
Co-op Bank is shipping capital by the day and, one by one, other banks have dropped out of the race.
After running up losses of more than £1bn over the past two years, Co-op Bank is shipping capital by the day and, one by one, other banks have dropped out of the race.
The way in which potential buyers are heading for the exit reminds me of Gordon Brown’s hopeless effort to sell Northern Rock in 2007 when it arguably was in a far better state than Co-op Bank.
In the event, the then Chancellor Alistair Darling was wheeled out to announce public ownership and a Rubicon was crossed which allowed bailouts for many of the High Street banks.
After the taxpayer was required to pick up hefty bills, we were assured by regulators that ‘too big to fail’ was a thing of the past. Plans were in place for the authorities to resolve troubled banks and bring the healthy parts back.
If the bond markets are any guide, the end could be nigh for Co-op Bank. First in line to take losses would be the holders of the subordinated bonds which plunged in value in latest trading and can now be bought for 40p in the pound.
The more secure senior bonds also are under pressure and are trading at 84p in the pound.
No buyers: : If the Bank of England decides that resolution is the only answer then the bondholders will be forced to take the pain
If the Bank of England decides that resolution is the only answer then the bondholders will be forced to take the pain, with no buyers in view so far.
The Government might be required to add the healthy bits of the bank to UK Asset Resolution which still owns chunks of the flawed Bradford & Bingley loan book and charred remains of Northern Rock.
It is possible that once the healthy parts of the Co-op mortgage book – which swelled by £3.1bn last year – and 90 bank branches have been hived off, a bottom-fisher will come into view. Virgin Money, which swooped in to buy the good parts the Rock on the cheap, could repeat the trick.
The continued uncertainty will be a source of concern for Co-op Bank’s 4m true-believing customers, including 1.4m current account holders. They may be comforted by the fact deposits are insured up to £85,000. Other stakeholders may be less lucky.
The annual report says responsibility for making sure members of the bank’s pension scheme are looked after is still not fully settled. The hedge funds which came to Co-op Bank’s rescue have done their investors no favours.
The ugly legacy of deal-hungry former Co-op Group chief executive Peter Marks, former Britannia building society boss Neville Richardson and disgraced former chairman Paul Flowers may never be erased.
Simon says: Lord Simon Wolfson offers better value than most retailers when it comes to understanding trends.
Lord Simon Wolfson offers better value than most retailers when it comes to understanding trends.
The Next chief observes people now prefer to spend disposable income on restaurants and entertainment rather than a new shirt or sofa.
He fears the game is up for bricks-and-mortar shops and is managing to squeeze more income out of stores by playing a property game swapping expensive inner-city outlets for larger, lower cost shops.
Next is battling with rising import costs, the national living wage and the apprenticeship levy, but still managed to deliver a 10 per cent return on sales in most of its shops.
Profits may have fallen for the first time in eight years, but at £790.2m and with online earnings booming the game is not quite up for the Tory peer.
After a chunky near 40 per cent fall in recent months, Next shares were top of the leader board in latest tradings with an 8 per cent rise.
Onwards and upwards.
Bit of a blow to the prestige of the London Stock Exchange that Pret a Manger owner Bridgepoint is choosing the New York Stock Exchange to float the UK’s healthy answer to McDonald’s.
Pity that London Stock Exchange chief executive Xavier Rolet hasn’t spent as much time on driving the City’s lacklustre initial public offerings market as on the deeply flawed deal with Deutsche Boerse.