The Co-operative Bank has announced a reduction in its commercial property portfolio as it re-allocates funding to “significantly enhance” its internet and mobile banking services. In fact, it hopes to cut around 15 per cent of its branch network by the end of next year – something which the banking chain admits will have an impact upon existing employees.
As of yet, the Co-op has not released details of the 50 branches set for closure but has simply claimed that the move is necessary in order to safeguard the future of the business.
Group chief executive Euan Sutherland says; “We do need to take the overall costs down, unfortunately that will hit jobs, but we don’t have the details today.
“We have taken a major step forward towards achieving our plan to secure the future of the bank.”
The Co-op Bank is in the process of implementing an emergency rescue plan after discovering a £1.5 billion hole in its balance sheet, which economists believe was caused by a combination of bad loans and the 2009 merger deal with Britannia Building Society.
This rescue plan will see the Co-op Group retain 30 per cent of shares in the bank, while group creditors will each receive a share of the remaining 70 per cent stake in the business.
Additionally, the Co-op Group has decided to contribute a total of £462 million in order to fund the rescue, which will hopefully secure the bank in order to allow for flotation on the London Stock Exchange in 2014.
While the co-operative culture of the bank will hopefully be safeguarded by a pledge to conduct only ethical business written into the principles or articles of association, the fact that the Co-op Group will now lose overall control of the bank may prove to be a sticking point for its five million customers.
While branch closures may certainly be a risky move therefore, especially in rural areas, it seems that focusing on its online offering may be the only lifeline the Co-op Bank can be thrown in this rescue attempt.
Do you think customers will be tempted to switch to a different high street bank as a result of these widespread branch closures, or do the majority of consumers prefer having greater access to online and mobile banking services in your opinion?
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