Total losses at the Co-op bank including write-downs were £2.1bn with most of the group’s other losses relating to its Somerfield retail business and acquisition of building society Britannia.
Chief executive Richard Pennycook said the worst results in the company’s history should serve as a “wake-up call” to anyone doubting how serious the challenges faced by the company are. He added that scale of the disaster will shock co-op members, customers and colleagues.
Last year hedge funds including Silver Point Capital, Aurelius Capital and Monarch Alternative Capital bought large amounts of Co-op bonds when their price collapsed after its credit rating was downgraded to junk level. The funds were subsequently able to use these holdings to take control of the bank when it needed £125m of fresh capital to remain viable. The funds ultimately profited when its bonds recovered some value.
These events have left the Co-op owning just 30% of its own shares and this figure could fall as a further £400m gap in its finances was identified last month. Issuing new shares may be the only option to plug the latest hole in the books.
Group chair Ursula Lidbetter said the company is planning urgent fundamental reform to put things right and ensure the company has better days ahead to look forward to.
