Co-Operative Bank Plc, the British lender whose chairman resigned amid a drugs scandal, said it will withhold almost 5 million pounds ($8.4 million) of executive bonuses as its annual operating loss almost doubled.
The loss widened to 1.3 billion pounds in 2013 from 674.9 million pounds the previous year as it set aside more money for souring loans and customer compensation, the lender said in a statement today. The bank doesn’t expect to report a profit in 2014 or 2015.
The Co-Operative Group Ltd., the mutual that owned the lender, agreed last year to cede control of the banking unit to creditors under a plan to plug a 1.5 billion-pound capital shortfall that stemmed from its 2009 purchase of the Britannia Building Society. Paul Flowers later stepped down as chairman after the Mail on Sunday reported that the Methodist minister had sought to buy crack cocaine and crystal methamphetamine.
“Past failings brought the company to the edge of collapse,” Chief Executive Officer Niall Booker told reporters on a conference call today. “Customers and stakeholders continue to feel angry about how the bank found itself in a financial situation that placed the future of the business so seriously at risk.”
The lender said in March it would need to raise 400 million pounds of additional capital to meet regulatory requirements. Co-Operative Bank’s Core equity Tier 1 ratio, a measure of financial strength, totaled 7.2 percent at the year-end, below the bank’s earlier guidance of the “upper end” of a 7 percent to 9 percent range.
“The bank faces an extremely difficult and unprecedented situation,” the lender said in today’s statement. “Without this additional capital the bank may have insufficient” capital levels to meet regulatory requirements.
Booker, a former HSBC Holdings Plc banker who was appointed CEO in June, said he’s confident the bank will be able to raise 400 million pounds even if its former parent doesn’t participate. Booker said the lender plans to shut 44 branches this year after closing 51 in 2013. It also cut about 1,000 jobs last year.
“The banks rehabilitation won’t be easy but our objectives remain unchanged,” said Booker. “We need to take some tough decisions.”
Booker has been paid about 1.7 million pounds since he joined the bank. He will be paid an annual salary of 1.2 million pounds next year and will receive an additional allowance of as much as 1.68 million pounds depending on the bank’s performance, according to the lender’s annual report.