Co-op Bank Thinks Better of Project Verde

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.

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2 Responses to Co-op Bank Thinks Better of Project Verde

  1. MJ Ray says:

    I share your conclusion with mixed feelings. It would have been great to have a branch in every major town at last, but at what cost? And while they don’t give the visibility and range of services of branches, I can continue getting counter service at Post Offices, who also seem to need our support.

    Should we press for a change in law so the bank doesn’t have to be a plc, or is that a distraction?

    • isn says:

      Isn’t the problem the extent of the regulatory requirements? Robert Peston summarises the problems quite well at http://www.bbc.co.uk/news/business-22276390, I think. More worrying if they pull out of it altogether unless some mutual solution were found to run a bank as a Co-op. I do think some legal form permitting a full bank and maybe a system to allow credit unions to grow into full scale co-op banks would be helpful. The German co-operative banks are one model.

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