* 2013 pretax loss 1.3 billion pounds
* Bank won't make a profit in 2014 or 2015
* Confident of raising capital even without parent's backing
* Bank CEO says Co-op Group could pursue "tail-swallow"
* CEO says investors 'very, very supportive'
(Adds comment from bank's CEO on Co-op Group's options, pay)
By Matt Scuffham
LONDON, April 11 Britain's loss-making
Co-operative Bank said it was confident of raising the extra
funds it needs to secure its future, even without the backing of
troubled parent the Co-operative Group.
The country's eighth-biggest lender on Friday confirmed it
lost 1.3 billion pounds ($2.2 billion) last year and warned it
would not make a profit this year or next.
The bank, which fell under the control of bondholders
including U.S. hedge funds last December after a 1.5 billion
pound capital shortfall was exposed, said last month it needed
to raise another 400 million to cover the cost of past
The future of the Co-operative Group, whose activities range
from supermarkets to farms, is also in doubt following the
resignation on Thursday of independent director Paul Myners,
whose plans to reform Britain's biggest mutual had met with
resistance from members.
The Co-operative Group, which owns 30 percent of the bank,
has yet to decide whether to take part in its fundraising.
"I'm confident we'll raise the 400 million even if the group
does not participate. Shareholders are very, very supportive and
I really, really think that we're going to get this through the
gate," Co-op Bank Chief Executive Niall Booker said on Friday.
The bank's other major investors, which include hedge funds
such as Perry Capital, Beach Point Capital and Silver Point
Capital, were not immediately available to comment.
Banking industry sources say they have little choice but to
come up with more money or risk losing the 1.2 billion pounds
they have already put in.
Booker apologised to the bank's 4.7 million customers for
its troubles, which were exacerbated when former chairman Paul
Flowers was arrested last November as part of an investigation
into the supply of illegal drugs.
"We appreciate that customers and other stakeholders
continue to feel angry about how past failings placed the future
of the business so seriously at risk. I would like to apologise
to them," he said.
Despite the negative publicity, Co-op Bank said the number
of customers using the bank for their main personal current
account rose slightly last year.
The Co-operative Group still owes the bank 263 million
pounds as part of its original bailout and would need to invest
another 120 million pounds to retain its 30 percent stake after
the latest fundraising.
"It's a decision for them. What I can say is they are
supportive of the quantum and the need for the bank to raise
this amount of capital," Booker said.
Booker said Co-op Group had a number of options, including
what financiers call a "tail-swallow". This would involve
selling some of its rights to new shares in the bank to generate
enough money to cover the cost of taking up the rest. That
option would not require the group to inject new cash and would
limit how much its stake is reduced by.
Banking industry sources say the decision is likely to come
down to whether the group, which is expected to show a 2013 loss
of around 2 billion pounds, can afford to stump up more money.
It is selling assets to raise funds and is considering
selling its pharmacy business which bankers say could fetch
between 450 million and 500 million pounds.
Co-op Bank must raise the new funds because its core tier 1
capital ratio, a measure of a bank's financial strength, has
dropped to 7.2 percent, dangerously close to the 7 percent
minimum required by Britain's financial regulator.
The bank said it would not pay close to 5 million pounds due
to some former directors and senior executives. However, it
risked criticism from lawmakers and Co-op members after
revealing Booker would be paid 4.6 million pounds in his first
18 months in the job.
Booker said he was aware of concerns over his pay so had
worked with the board to tie a significant proportion of his
remuneration to the bank's survival. He said he had committed to
stay with the bank until its future is secure.
"Over the longer term and, as the bank returns to a more
stable state, I would expect to hand over to a new chief
executive," Booker said.
($1 = 0.5961 British Pounds)
(Editing by Erica Billingham)