Co-operative Bank to cut hundreds of jobs as new chiefs clamp down on costs

Company has sunk to a loss and aims to return to profit – but also has plans to state its ethical stance officially for first time

Co-operative Bank is expected to signal on Monday that hundreds of jobs could be under threat as part of a pledge by the new management team to cut costs.

In documents due to be published by the bank, it will signal a need to shed costs from a business that employs 10,000 people as it scrambles to return to profit.

The bank, which declined to comment, has sunk to a loss and needs to raise £1.5bn under a controversial proposal that will require the Co-operative Group to concede control of the bank after pressure from two major US hedge funds.

Prospectuses setting out details for bondholders are scheduled to be published on Monday to provide information about the new business plan of the bank and the exact terms being offered to bondholders who are to own 70% of it.

The Co-operative Group, which owns funeral homes, supermarkets and pharmacies, will set out that it now expects to put between £400m and £500m into the bank, while bondholders will find the remainder.

Under a previous plan, announced in June, the group planned to put in £1bn and keep a 25% stake, but that sum has now been reduced after protracted discussions with a group of bondholders under the name LT2 – so called because they own lower tier two debt.

Two hedge funds, Silver Point Capital and Aurelius, have led the LT2 Group and will end up with shares in the Co-op Bank which is to be floated on the stock market.

The Co-op Group will be the largest single shareholder with a 30% stake and none of the others will own more than 10%.

The bank hopes to quell concerns that its ethical status will be undermined by the stock market flotation, and the involvement of the hedge funds, by writing its commitment to an ethical stance in its articles of association. This will be the first time its stance has been spelled out so clearly.

The bank, which is already a plc but owned by a mutual, will also focus on retail and small business banking and pare back costs, although precise details of the scale of job losses are not expected to be published in the prospectuses.

The failure of the Co-op to take over 631 branches from Lloyds Banking Group in the Project Verde deal will continue to be examined this week when the former chairman of the bank appears before the Treasury select committee of MPs.

Former chairman Paul Flowers is likely to be asked about his banking qualifications when he gives evidence, which was delayed from last week when former chief executive Barry Tootell appeared.

The committee has already heard from Peter Marks, who was chief executive of the overall group until May, who described its problems as a "tragedy".

Some of loans that the bank inherited from the 2009 deal to buy the Britannia building society are now being wound down by the Co-op.

Article Source : http://www.guardian.co.uk
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