UK's Co-op Bank completes 400 million pound fundraising

* Co-op Group’s stake will fall to 20 percent

* CEO says focus on ‘values and ethics’ remains

LONDON, May 10 (Reuters) - Britain’s Co-operative Bank said on Saturday it had completed a 400 million pound ($674 million) fundraising to bolster its capital position.

The capital raise, which was launched on Friday, is subject to shareholder approval at a general meeting that will be held in due course, the bank said in a statement.

“This capital will strengthen the Bank for our customers and enable us to continue with our business plan, which aims to return the bank to its roots as a bank focused on our retail and SME customers with values and ethics at the heart of what we do,” said Chief Executive Niall Booker.

The Co-operative Group’s stake in the bank will fall to just above 20 percent as a result of the capital raise, down from 30 percent previously.

Co-op Group ceded control of the bank to bondholders including U.S. hedge funds last year as a result of a recapitalisation to plug a 1.5 billion pound funding gap. Two of those - hedge funds Silver Point and Perry Capital - have been granted the right to nominate a director to the board of the bank for as long as they hold a stake of at least 5 percent.

Booker said the Co-op Group’s diminished shareholding would not affect the bank’s ethical focus, which includes commitments such as not lending to weapons makers.

“Values and ethics remain at the heart of the bank’s business, as evidenced by the fact they are embedded in the bank’s articles of association, and this is supported by our shareholders who recognise the importance of this to the future of the bank and its customers,” he said.

$1 = 0.5938 British Pounds Reporting by Matt Scuffham; Editing by Toby Chopra