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Co-Bank posts £709m loss as it presses ahead with bail-in

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The Co-operative Bank has reported losses of £709m for the first half of the year as it presses ahead with controversial plans to plug its £1.5bn capital shortfall.

The half year results show losses were driven by £496m of loan writedowns and £61m related to further consumer redress payments, including payment protection insurance misselling. It compares to losses of £57m for the same period in 2012.

The results also reveal the bank is pressing ahead with plans to address its £1.5bn capital shortfall, including the proposal for bondholders and preference shareholders to exchange their holdings for equity in the bank in a move that could cost them £500m. An exchange offer has been organised for November to agree to the so-called “bail in” flotation.

An action group of Co-op bondholders has attacked the plans, which have already seen investors have their income payments delayed from July to November. Co-op has previously stated the delayed payments will be made if investors agree to the exchange offer.

Group chief executive Euan Sutherland says: “While I recognise the concerns of affected bank bondholders and preference shareholders we remain confident that under the plan announced we are doing all we can to deliver the best solution for the future of the bank – something that is in the longer-term interests of all stakeholders.”

Radcliffe and Newlands chartered financial planner Mel Kenny says: “Losses incurred by investors is part and parcel of the potential risks in investing. That said, from a PR perspective it is an absolute tragedy this controversy surrounds an ethical bank.”

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