In what is probably a very wise decision the Co-op Group board decided yesterday to pull out of the plan to buy 632 Branches from Lloyds TSB. Maybe organic growth, while unexciting, is healthier and the demand for capital, while still real will be less. The FT reckons the need for extra capital for the bank remains and will require further sales of businesses by the Group. Read the Group statement here.
While this must be disappointing for the Group and the deal was planned at a good price, the problem of the increased capitalisation demanded across the banking sector and the impossibility of using Equity without threatening the identity of the co-op just made it a step too far.
It’s great to see the Group supporting the Bank in the way it is without going down a route such as issuing equity in the Co-operative Bank PLC subsidiary, which would threaten the whole co-operative nature of the organisation. That would be a disaster for the British Co-operative Movement.