The Co-operative Bank just lost a senior member of staff that was charged with the task with turning around the beleaguered lender.
The Co-op Bank confirmed to Business Insider that Bob Rickert, the chief financial officer at the lender, left the company last week after less than 18 months into the job.
His departure comes after the Co-Op Bank was the only British lender out of six to fail the stress test set up by the Bank of England in December last year.
While the Co-op Bank’s spokesperson told us that the two events are unrelated, and that Rickert left “on his own choice,” his departure is was touted by the Telegraph as a clash of cultures. According to the newspaper’s unnamed source, he was “asked to leave” after “he brought over with him both former colleagues from Barclays and a more aggressive style of management.”
In May 2013, the Co-op Bank shocked the markets after it reported a £1.5 billion capital black hole. The revelation forced the Co-Operative group, until that moment the main shareholder, to seek a bailout from private investors.
This led to the 143 year old “ethical bank,” which was known to refuse business partnerships that are deemed un-ethical, like in companies involved in fur trades or poor labour practices, being majority owned by hedge funds.
Meanwhile, the Co-op Bank was downgraded to junk status by Moody’s, and eventually the lender’s CEO Barry Tootell resigned. He was replaced by former HSBC banker Niall Booker by the end of the month.
Booker, through his spokesperson to Business Insider, said Rickert “leaves an important legacy behind” and that the bank is not looking for anyone else to hire in his place at the moment.
‘A sorry story of failings’
The road to recovery for the Co-op Bank, which is one of Britain’s smallest lenders with only 5 million customers, has been a rocky one.
A series of executive scandals and damning independent reports into the governance and structure of the bank and its parent group led to the company and its lender overhauling its management.
While the Co-op Bank is majority owned by hedge fund shareholders, it is still part of the parent company, the Co-operative Group.
In April 2014, the independent report by Christopher Kelly, said the Co-op Bank was a “sorry story of failings in management and governance on many levels.”
That same month, Lord Myners announced he was quitting his role to help turn around the group and the bank as it was likely that the board would reject his proposals.
“Radical decisions on governance need to be taken soon — and with resolution — if the Co-op, as my mother knew it, is to be saved,” he said at the time.
“The reforms I have set out are fully compatible with the core values and principles of Co-operative ownership. I have no interest in advocating the adoption of a PLC model, as some of my critics have claimed. But I do want to see a governance structure that works; the present one has lamentably failed. The decision lies in the hands of elected democrats. I have done all I can do.”
Around the same time, the Co-op Group boss boss Euan Sutherland quit after just ten months into the job. He called the group “ungovernable.”
According to an unnamed source in a Guardian newspaper report, Sutherland was also clashing with investors (emphasis ours):
What we have here is a clash of cultures between PLC people and the Co-op people. Euan is a PLC animal and he is used to responses on a timescale and of a type that the Co-op isn’t used to. We have tried this in the past, to bring people in from outside at a senior level, and it has never worked. Because they have not grown through the culture they try to make the beast dance in a way that the beast doesn’t want to dance.
One month later, Lord Myners delivered his damning 180-page report into the Co-op Group and the Co-op Bank:
“There is no short cut to recovery from its present weakened state. It will require retrenchment and some painful choices. Financial health can only be restored through steady, step by step, rebuilding of the group’s profitability and repayment of its excessive debt.
“Because of the losses exposed last year and their severe impact on the group’s balance sheet, the high level of debt now being carried by the group has made it inevitable that the bank syndicates providing this funding will, for quite obvious reasons, continue to take the closest interest in the group making rapid progress to strengthen its governance.
“The group’s bottom-up, competitive election process provides no rigour for assessing the commercial capability levels of candidates as there is no meaningful competency bar in place. Similarly, it provides no scope to balance the capabilities and fill skills gaps.”
Pressure from hedge fund investors
Co-op will publish its annual financial results at the end of March. Another important document that investors are still waiting for is the bonus plan for its executives, which has been put on hold since the failed tests in December.
The bank changed its chairman last month. After a long courtship, the Co-op Group confirmed that the former boss of Asda, Allan Leighton, would take the helm.
Meanwhile, Booker’s contract expires in July 2015, but according to Sky News he is set to stay for another year at least. Sky also reported that Booker is facing pressure from US hedge funds that now control the majority of the shares at the bank.
Sky said that private shareholders are unhappy with Booker’s conduct of the bank, but are keen to give him another chance. This is mainly because he has the support of the Bank of England, who is against the group making another round of management changes.