Two more senior Co-operative Group directors have been shown the door in the wake of the disastrous performance of the mutual's banking division.
Mr Slack was a key member of the team responsible for the disastrous computer system upgrade for the banking operation that cost the mutual more than £200m. The new IT platform, known as Finacle, was meant to combine the computer systems of the Co-op Bank and Britannia Building Society following the Co-op’s 2009 acquisition of the rival mutual.
The Co-op spent £250m on Finacle but has since had to write off the cost due to problems with the system, adding to the capital shortfall that led Moody’s downgrade. Co-op Bank’s spending on the system was counted as capital expenditure and was therefore not taken through its proﬁt and loss account.
However, taking these costs into account means the business would not have made a proﬁt since 2009.
For instance, in 2010 the bank reported a pre-tax proﬁt of £48.9m, but once the cost of its annual IT expenditure is factored in the business made a loss of £20.1m. Similarly in 2011 a £54.2m proﬁt becomes a £16.9m loss once the cost spending on the computer system is deducted from the bank’s earnings.
The dramatic change to the bank’s proﬁts shows the huge amounts the Co-op Bank was spending on the system.
Co-op Bank had until April been in the process of buying 632 branches from Loyd's Banking Group, which would have come complete with a brand new IT platform to which the lender could have transferred its entire business.
However, the acquisition of the so-called 'Project Verde’ business collapsed last month around the same time Mr Slack left the bank. Responsibility for Co-op Bank’s IT systems has now passed to Andy Haywood, a former senior IT manager at HBOS and the head of IT at the Co-op. Mr Haywood worked for Boots before joining Co-op in January 2012.
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