The Guardian – The Co-operative Group on Monday sought to reassure customers of its troubled banking arm that its ethical approach could be maintained as it confirmed that activist hedge funds were taking a crucial role in the £1.5bn rescue of the bank.
The loss-making bank indicated that a significant number of jobs were on the line as it announced a sweeping restructuring that will see the closure of around 50 branches from its 324 estate. It plans to move more customers to online banking and its network of corporate banking sectors is also to be rationalised. Even so, it warned that it would not make profits until 2015 at the earliest, and possibly not “for some years thereafter”.
The restructuring is an attempt to stabilise the bank, which needs £1.5bn of extra capital to absorb losses on loans that have turned sour. Until now, it has been 100% owned by the mutual Co-operative Group.
The group of supermarkets, funeral homes and pharmacies is being forced to hand 70% of the bank to bondholders led by the US hedge funds Silver Point and Aurelius, who have forced dramatic changes to the original plan first announced in June.
Richard Pym, the new chairman of Co-op Bank, said that if the bondholders did not vote for the new scheme the only alternative was “resolution” – in other words, being taken under the control of the Bank of England, or even possibly nationalised.