Co-operative Bank chief executive Barry Tootell has quit with immediate effect after reports the bank may need taxpayer support as it faces losses from new writedowns on bad debts and expenses related to its 2009 acquisition of Britannia Building Society.
According to the Telegraph, Moody’s has downgraded The Co-op’s credit rating, warning it saw “moderate potential for systemic support likely to be forthcoming from the UK authorities”.
Moody’s says the Co-op Bank’s ratio of problem loans increased to 11 per cent at the end of 2012, up from 8 per cent a year earlier, due to a deterioration in its commercial real estate portfolio.
The Telegraph says the bank may have a £1bn shortfall in its capital requirements.
The bank says Tootell’s departure is due to the collapse of a deal to buy 632 UK branches of Lloyds Banking Group last month, which the bank blamed on a weak economy and high capital requirements. Tootell is being replace by interim chief executive Rod Bulmer.
In a statement, the Co-op Banking Group says: “We are disappointed by the ratings downgrade announced by Moody’s. We have a strong funding profile and high levels of liquidity, which are significantly above the regulatory requirements.
“We do acknowledge, like the rest of our banking sector peers, the need to strengthen our capital position in light of the broader economic downturn and the pending introduction of enhanced regulatory requirements, and we have a clear plan to drive this forward throughout the coming months.
“In March, we announced the sale of our life business to Royal London and also our intention to sell our general insurance business. In addition to these measures we plan to significantly simplify our business, which will greatly improve our operational effectiveness and also enhance our capital position in the process.”