Mortgage brokers and advisers have greeted news Co-op Group has sold off its remaining stake in the Co-operative Bank with caution, saying they will
Mortgage brokers and advisers have greeted news Co-op Group has sold off its remaining stake in the Co-operative Bank with caution, saying they will be closely monitoring the fallout from the move.
The Group sold 80 per cent of its shares in the bank to hedge funds in 2013 as part of a stock market flotation to rescue the lender, following the discovery of a £1.5bn capital hole.
Its remaining 20 per cent was reduced to 1 per cent at the start of September as part of a £700m rescue package to recapitalize the bank. That final 1 per cent has now been sold off for £5m.
Sam Instone, chief execute at London-based AES International, said uncertainty around the future and stability of the Co-operative Bank has undermined its reputation in recent years, with a reportedly 25,000 current account customers leaving in the first 6 months of 2017.
“The fact the Co-operative Group has now sold its final stake could be good news for the bank, and give it the opportunity to distance itself, reputationally, from the Group, which has just reported a fall in profits,” he said.
“Time will tell whether consumers regain trust in the bank sufficiently to trust it with their mortgage business.”
Similar sentiments were echoed by Scott Gallacher, chartered financial planner at Leicester-based Rowley Turton.
“I think it’s a sad day for the bank and I suspect many loyal customers will be concerned what this means to the bank’s ethical stance. Ultimately only time will tell if this is a new beginning.
“If they can retain their existing customers I suspect we’ll see little change in the short term and I don’t think this will have any immediate affect their mortgage business.
“I would remind any savers to be cautious on having more than the Financial Services Compensation Scheme depositor’s protection limit held with any one bank.”
However, a statement released by the Co-operative Bank, said the changes have “no impact to any day-to-day operations within the Bank” or to its customers.
And some experts, such as Carl Shave, director at Suffolk-based The Mortgage Centres, believe that the changes could result in a positive spell for the bank and its mortgage business.
Mr Shave said: “ The sale of the final 1 per cent of the bank shows the intentions of the Group and should now enable the banking division to wholly focus on it’s core values.
“This should hopefully filter through into their mortgage business and enable them to reignite their brand name within this sector and push to compete for market share.”
Chris Sonne, a spokesman at the Co-operative Group, said as a result of the recapitalisation of the bank, the relationship agreement between Group and bank which covers, among other things, the promotion of bank services to members of Group, will “naturally fall away and come to a formal end in 2020”.
In August, creditors behind previous rescues of the bank swapped their debt for equity. In a move approved by 90 per cent of members, the bank was left in the control of five hedge funds – BlueMountain Capital, Cyrus Capital Partners, GoldenTree Asset Management, Anchorage Capital, and Silver Point Capital.