The Co-operative Group has taken a £39m hit to the value of its stake in its eponymous loss-making banking arm.
The 20% stake is now valued by the grocery and funeral homes business at £185m, suggesting the entire bank may now be worth less than £1bn. The shares are not listed on any stock market so no public value is placed on them.
The writedown also indicates that the mutual values the bank at less than the £333m it pumped into the troubled operation three years ago to keep it afloat.
At the height of the crisis in 2013, the Co-op bank needed £1.5bn to remain afloat which led to hedge funds and other investors taking a stake in it, and prompted the revelations about its former chairman Paul Flowers.
Until this point the bank had been wholly owned by the mutual, which reduced its stake to 30% and then to 20% in 2014.
The Co-op Group’s annual report published last week showed that the value of the stake had been cut by 17% during the year. “The reduction in the investment value reflects the market conditions that have impacted the banking sector, pushing down share prices, in particular, the longer than expected low interest rate environment and increased payment protection insurance (PPI) provisions,” the annual report stated.
“Our value is based on public information contained within the bank’s accounts and investor presentations. The bank recorded a loss of £611m in the year,”.
This month the Co-op bank revealed its losses had widened from £264m a year ago. The loss reached £661m after a £121m hit in losses on unwanted assets and PPI while losses on loans rose by more than £100m. The bank is expected to make a loss again this year.
