Co-op AGM faces up to bank worries

co-op bankConcerns about the financial health of the Co-operative's banking arm are likely to loom large when the food-to-funerals group faces members at its AGM.

The meeting in Manchester will also see the departure of chief executive Peter Marks, who is retiring after more than 40 years in the co-operative movement. He has been at the helm during a period of rapid expansion for the group, including the acquisitions of Somerfield and Britannia Building Society.
He is being replaced by Euan Sutherland, former chief operating officer of B&Q owner Kingfisher, who has no formal experience in banking.

One of Mr Sutherland's first tasks will be to inject confidence into the banking arm after the collapse of a deal to buy more than 600 Lloyds banking branches and a recent downgrade to junk status by ratings agency Moody's.

The downgrade forced the Co-op to reassure customers on its finances, with the bank saying: "We haven't sought, nor do we need, Government support."

Mr Marks, who has run the member-owned group since 2007, drove its £1.6 billion takeover of supermarket chain Somerfield in 2008 and the 2009 rescue of Britannia, then Britain's second-biggest building society.

But the Britannia deal proved a step too far, with toxic commercial property and home loans it inherited dragging its banking arm to losses of £662 million in 2012.

That pushed the group to statutory losses of £599 million in 2012, from £373 million profits a year earlier.

Moody's said the Co-op under-estimated the risks of the Britannia acquisition, especially against the backdrop of weak economic conditions.

As a member-owned institution, the Co-op is hamstrung in its ability to raise fresh capital, unlike plc banks which can issue shares to boost funds.

© 2013 Press Association
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