Barry Tootell will be replaced in the short term by fellow director Rod Bulmer. This latest double whammy comes only a week or so after the bank’s ill-fated attempt to buy 631 branches from Lloyds finally hit the buffers, and leaves the Co-Op Bank looking, frankly, a bit of a mess.
Moody’s now rates the Co-Op Bank at E+ ‘not prime’ (a euphemism for junk), down from C-. The agency also warns that external support may be needed to prop up the balance sheet against the risk of forthcoming losses. And new financial regulator the PRA may be about to force it to sell off its insurance and life insurance businesses to raise capital.
On the other hand, since their inglorious roles in the dark days of the crash, the judgments of the ratings agencies carry substantially less weight than they did. And Tootell was expected to stand down shortly anyway, on account of the fact that the job he was hired to do - integrating all those ex-Lloyds branches - is no longer there. So all that’s really happened is that he has brought his plans forward rather abruptly.
From a brand point of view, the Co-Op Bank actually looks rather strong, and is in the unique position of being a large UK high street bank whose customers seem to like it, rather a lot. We could all wish that more rivals would emulate its ethical stance and reputation for good service.
But after all this bad news there can be little doubt that the question of whether to remain in banking is pretty high on Euan Sutherlands’s to-do list.
The new CEO of the Co-Op Group must decide whether that brand potential is worth the risk that the cost of shoring up the bank will drain resources from the parts of the business - retail, funeral homes - which are currently much more profitable. It is not as straightforward a choice as it might initially seem…