The Co-operative Bank still has a future, according to the Co-operative Group Chair, but it will be different to today’s bank.
Len Wardle, Chair of the bank’s parent organisation, has outlined plans to slim down the bank and implement cost-cutting practices across the whole of the Co-operative Group.
Mr Wardle said: There’s still a great future for the Co-operative Bank in a slightly different guise from what it is now. So we need to slim it down, get back to its basic, become a more retail bank and I think a bank with ethics that can differentiate itself from the rest of the competitors on the high street is well worth fighting for.”
In June the Co-operative Bank announced it had a capital blackhole of £1.5 billion, and last month the Group announced an overall half-yearly loss of £550m. Following on from these losses, Mr Wardle said the Group board is looking at reducing the cost:income ratio of the Bank, which he said had “always been high compared to other competitor banks on the high street”.
He added that overheads in the Group need to be reduced as well. But at the same time the long-term strategy is to look at a reboot of the membership offering. Said Mr Wardle: “We need to re-focus on what membership means and to roll out an identifiable membership proposition that is more understandable than it is at the moment, because lots of people have their membership card and their not entirely sure what it is. Is it a loyalty card? Is it an ownership card? We need to differentiate the Co-op from the rest of the competitors and make sure that we do that through a membership proposition.”
In an online video statement, Mr Wardle also apologised to those members and other stakeholders for the challenges faced within the Bank. He said: “I would like to apologise as well because we should never have got into this situation and how we got here is something else that we need to look at.”
Last month, Sir Christopher Kelly launched an independent review into the events leading up the capital action plan for the bank. This, said Mr Wardle, will provide many answers and he has been given a directive to “leave no stone unturned”.
Mr Wardle commented: “We thought it was very important to understand what went wrong, to learn the lessons from any mistakes that took place going back to the merger with Britannia and all the other things that have happened in between. So we appointed Sir Christopher Kelly to do this independent enquiry … I said to him … he must leave no stone unturned. Every filing cabinet, every email, everything will be opened up to him. So he must search and look wherever he wants.”
Mr Wardle also revealed that over the past few months the Group has prepared for every eventuality, including nationalisation. He said: “The Group Board and the Bank Board have to consider everything and indeed in the situation which the Bank found itself, the PRA requires you to look at the extreme. So handing the keys into the Government, you have to have a plan for that as well. You have to plan for everything.”
In response to calls from bondholders asking the Co-operative Group to put more money into the share exchange offer, which is expected to be announced later this month, to lessen their losses Mr Wardle said: “We have put into the pot all that we can afford. You’ve got to remember that the Group has debts of its own.”
Mr Wardle also said that the Rochdale pioneers, founders of the modern-day co-operative movement, would understand the steps that the Group is taking. “They were pragmatists and in this day and age pragmatism is something we’ve got to be aware of,” he said. “You’ve got to remember that in this country the United Kingdom, a co-operative bank cannot be a co-operative. It is not permissible by law. So the Co-operative Bank is and always has been, a public limited company and indeed it has preference shares that have been quoted on the Stock Exchange for many, many years and we have to undergo as a bank all the listing processes that any Stock Exchange company does already. So it’s a development of an existing situation.
“The Co-operative Group owns all the ordinary shares of the Bank and it will be the ordinary shares that will be offered to the bondholders in exchange for the deal, and that is how the shares will become quoted on the Stock Exchange.”
He also added: “If you look at what happens on the continent, many co-operative banks are in fact partly quoted on the Stock Exchange. One of the largest French banks Credit Agricole is quoted on the Stock Exchange, but it is fundamentally a co-operative bank.”