The Co-operative Bank is seeking to raise an additional £400m after discovering further legacy issues relating to missold payment protection insurance and interest rate swaps.
In an announcement today, the bank says the capital position of the bank is weaker than previously thought as a review of its legacy operations, assets and liabilities has unearthed “a range of issues”.
It says the discovery means it will make a pre-tax loss of between £1.2bn and £1.3bn for 2013. Its full results, initially expected on 26 March, will now be published on or before 8 April.
Co-op Bank chief executive Niall Booker says: “The new executive team brought in just nine months ago is continuing to review aspects of the Co-op Bank’s legacy operations, assets and liabilities.
“As a result of this continuing review we are unearthing a range of issues which the new executive team is having to address.
“The result of providing for these items together with the cost of separation from the Co-op Group is that the starting capital position of the bank for the four to five-year recovery period is weaker than in the plan announced last year. The proposed capital raise would enable us to reset this starting point and continue with the execution of our original business plan.”
The bank says it expects to report charges relating to conduct and legal documentation issues of £400m for 2013.
It says: “These conduct and legal documentation issues include legacy PPI business, mortgage product first payments, interest rate swaps, third party insurance and technical breaches of the Consumer Credit Act.
“In addition, one-off costs and processes associated with the separation of the Co-op Bank from the Co-op Group have proved more costly, more time consuming and more complex than anticipated.”
Costs relating to the separation of the bank from the group are expected to total £40m in 2013.
The Co-op Bank had to be rescued last year after it was left with a £1.5bn capital shortfall, with many of its troubles stemming from the merger with the Britannia Building Society in 2009.
In November, it announced that a group of private investors would inject nearly £1bn into the bank in exchange for a 70 per cent ownership stake.
Earlier this month Co-op Group chief executive Euan Sutherland resigned after less than a year in the job.