In a letter to members aimed at reassuring them it is taking action to address the problems besetting its bank business, group chief executive Euan Sutherland says questions over the strategic decisions that led to a £1.5bn hole in The Co-operative Bank’s finances have “clearly” damaged the Co-operative Group brand – which includes food, funeral care and legal services – “and all that it stands for”. He insisted, however, the Group will not be hurt in the long-term.
He adds: “These are clearly difficult times for us but I believe they are challenges that we are now well placed to meet. The Co-operative Group remains fundamentally strong and our ethical leadership, in retailing and the provision of financial services, remains a compelling force in the market place.”
The Co-operative announced details of its plan to rescue its bank in May – a complex “bail-in” process that will see bond holders offered shares in the bank, backed by Group capital. Although it avoided the need to seek state aid, the fact bonds were exchanged for shares meant the bank will have a listing on the London Stock Exchange , raising questions about whether the bank can still position itself as a mutually owned, ethical alternative to high street banks.
Sutherland says using only Group capital to bail-out its financial business would have led to the sale of one of the Group’s businesses and be to the detriment of the Group’s “future sustainability”.
Data from YouGov bears out Sutherland claims of brand contagion. According to its BrandIndex measure the Co-operative’s Buzz score – a net balance of the positive and negative things people have heard about the brand – as a supermarket has fallen 6 points over the last three months. Its bank brand fell 17.5 percentage points over the same period.