Special Alert : Who will take on Co-op?
Could this finally be the end for the Co-operative Bank as we know it? The troubled lender has put itself up for sale as the £1.5bn deficit, created by the bank’s takeover of Britannia building society in 2009, and record-low interest rates continue to erode profits.
The Co-op Group has been a minority shareholder with only a 20% stake in the bank since its former chairman Reverend Paul Flowers was embroiled in a drugs scandal in 2013 and it lost its majority control to a number of US hedge funds.
The big question now is who will be willing to take on the bank’s risky balance sheet? The most likely scenario is that the 1.4 million current account holders – essentially the “good” part of the bank – will be separated from the less appealing parts of the business. It still has a considerable amount of toxic loans on its books inherited from the Britannia deal and has been hit by scandal after scandal in recent years. Barry Tootell, chief executive of the Co-op bank five years ago when its deal with TSB spectacularly fell through, was banned from the accountancy profession in October and ordered to pay £20,000 in costs after admitting misconduct during his tenure.
So now, the future of the bank and its ethical heritage hangs in the balance. Could its unique appeal, as an independent beacon of hope in an industry marred by scandal and deceit, be lost altogether? The Co-op’s 1.4 million loyal customers, who have stuck around through thick and thin, have largely kept the institution afloat over the past decade. So, whoever does buy the bank will need to clean up its image and ensure that ethics remains at the centre of its business model. “It has been clear that without the ethical focus, the bank wouldn’t stand a chance,” Shaun Fensom, co-founder of the Save Our Bank campaign set up by the bank's customers in 2013 to safeguard its ethical approach to business, told the Financial Times last week.
Some suggest ethical banking has become an oxymoron and that the Co-op’s ethos and business model are all but dead. But the 10,000 members of the Save Our Bank initiative, and Co-op’s loyal customers, suggest something different. A recent survey found that 85% of the Co-op's customers chose the bank because of its ethical policy. Surely that can't be ignored?