In a bid to raise capital, the Co-operative Bank is to issue new shares, which could see its former parent organisation’s stake reduce to 20%. The Bank’s chair has also signalled his intention to step down.
The Co-operative Group, which gave up full ownership of the Bank last year, still retains a 30% share of the plc. The Bank aims to raise £400m through the issue of 200 million ordinary shares at £2 each. The Group’s stake could be reduced to around 20%, although the official figure will not be known until the transaction is approved by shareholders at the general meeting in late May.
Chief executive Niall Booker also confirmed that the five largest shareholders had agreed to the equity capital raising initiative. Last year the Bank was listed on the stock market after it was revealed it had a £1.5bn capital shortfall. Hedge funds now have a 70% stake in the bank, but with this move they could own an even bigger stake in the Bank. Four major shareholders have agreed to take 31% of the new shares.
“If successful, the additional capital to be raised through this transaction will enable us to reset our starting capital position for the execution of our business plan to return to our roots as a bank focus on our retail and small and medium enterprises customers with value and ethics at the heart of our business.”
The Bank aims to improve its capital position to cover the significant cost and tax consequences of separation from the Co-operative Group. According to the Bank’s management team additional capital is required.
“The business plan is being implemented and there have been some encouraging early signs. We have started to simplify the business, reduce costs and de-risk the non-core assets, while remaining committed to the values and ethics that continue to set us apart,” said Mr Booker.
“I remain extremely grateful for the continuing support and loyalty of our customers and Shareholders and would like to reassure them that the completion of this capital raising will assist the new management team in the implementation of the business plan that aims to return the Bank to health over time.”
The Bank has also announced that chair Richard Pym will be stepping down from his role by the end of the year.
“Richard has been instrumental in the important governance changes which have been implemented at Board level and his relentless appetite to bring about change and improvement has been an inspiration to us all. I look forward to working with him over the coming months to ensure an orderly transition to his successor and wish him all the best in his future endeavours,” added Mr Booker.