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.
Steve Hume's, finance director of the supermarkets-to-funerals group, is to step down following the series of disasters that forced the mutual to deny it needed a taxpayer bail-out and have left it with a potential £1bn-£1.5bn capital hole. Jim Slack, chief information officer at Co-op Bank, has recently left, it can be revealed.
The changes are believed to part of a comprehensive review by Euan Sutherland, the group’s new chief executive. He will update the Co-op’s 20-strong board on Friday about the bank’s capital problems, which have forced it to stop lending to new business customers, and pledge to have a solution in place by June.
Investment bank UBS and lawyers Allen & Overy are working on the strategic review, which could result in the sale of a part of the core business – such as the funerals service.
Mr Hume's and Mr Slack are the latest senior directors to leave the group amid concerns about problems in Co-op Bank. Brian Tootell, the bank’s boss, quit after Moody’s slashed the division’s credit rating to “junk” earlier this month and suggested it might need state support. In February, James Mack, his finance director, left to join another financial services company.
Mr Sutherland, who only took the helm earlier this month, is believed to be close to making a string of senior appointments already, including replacements for Mr Hume's and Mr Slack.
Mr Hume's, who will step down shortly, has been group finance director since 2011, having previously held the same role in the food division. He joined the Co-op in 2000. Mr Slack, chief information officer of the Co-op Bank, left the business last month for “personal reasons”.
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.
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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