The post below this update was published on the 24th April 2013. In it I talk about the huge waste of customers money that went towards a failed IT upgrade, and the issuing of bonds to other banks by the Co=operative:
“The big selling point from the Coop is “Unlike other banks, we don’t have shareholders to worry about – our only shareholder is you, the customer”. Well that’s grand, except that the Co-op sells hundreds and millions of pounds worth of ‘debt’ bonds to the big banks (JP Morgan, Barclays, UBS, etc…) regularly on the money markets, and these guys want a return. They won’t invest in the first place unless they see the Coop doing the things they expect to see banks do.”
Well, not to worry you and all, but following this announcement today:
http://www.bbc.co.uk/news/business-22932688 – (Co-op Banks Stock Market Future)
… I’d be worried. In the article Robert Peston brushes over the main holders of co-op bonds who are set to become share-holders:
“Although they are being offered shares in Co-op Bank and new bonds, holders of Co-op Bank’s subordinated debt will incur very big losses…These are mainly investment institutions, such as pension funds and life insurers.” – Robert Peston. BBC News.
He then goes on to talk about around 5000 small bond holders, each with around £1000 each (this bit doesn’t add up, literally, see the comments on the article). But don’t let that fool you – as far as I remember, the ‘investment institutions’ that hold the majority of the ‘subordinated debt’ bonds are the likes of UBS, Barclays & JP Morgan. As I mentioned in my original article, the treasurer used to update the company intranet with this information regularly.
So there you have it. If there ever was a shred of true alternative and ethics in the Co-op, it will surely be stamped out by the interests of it’s creditors now. How can it purport to maintain it’s ethical stance when being funded so heavily by companies that don’t hold the same ‘code’? The simple answer is, it can’t, it won’t, and I doubt any of the top dogs are really that interested anyway (outside of press statements). We now have a former HSBC boss running the show, and this is already happening.
And finally – they try to blame this on the debt of Britannia when they bought it. Can any Britannia customers/employees reading this who voted for the ‘merger’ remember ever being told about huge toxic debts that would have caused Britannia to fail if the co-op didn’t step in? No? That’s because they didn’t tell us. We were lead to believe this was a merger of equals, though I learned some years afterwards that Britannia would have failed, and that was the true reason for the ‘merger’. Well, there is no way the Co-op wouldn’t have known they were taking on the debts they were, and is everyone forgetting the £500 million failed IT project? (that’s probably a conservative estimate – however, the creative accountants will have dumbed this down in any official reports).
So, let’s see what happens next. Apparently this deal would cause the big bond holders to take a significant loss in exchange for shares. Well, they won’t agree to that unless they think they are getting something out of it or that the resulting shares have the potential to greatly outperform the original return they agreed with the bond. And none of this answers the fact that the Co-op is still running on an old creaky IT platform and Britannia still isn’t integrated. Doesn’t sound like a very good investment to me. If I was JP Morgan – I would have my eye on another prize… takeover or asset stripping to reclaim my losses.
As I said, let’s see what happens next. My guess is, it won’t much resemble what they are saying today.
(original article below)
April 24th 2013:
It’s quite liberating to be able to talk openly and honestly about my former employer the Co-operative Bank, having now dived to safety some months ago, without the worry of falling foul of their ‘social media’ policy, effectively threatening employee’s with dismissal if they say anything negative on-line. (nothing unusual there for a big company nowadays).
Well, I don’t work for them any more so I can say what I like. I can say, beware of the Co-op, it is a wolf in sheep’s clothing. It acted (and acts) almost exactly like any other bank with its schemes and pilfering of customer’s money, and in some respects, it’s worse because it hides behind the Rochdale pioneers ‘co-operative’ movement, which they have grown so far apart from, the pioneers themselves wouldn’t recognise it.
The big selling point from the Coop is “Unlike other banks, we don’t have shareholders to worry about – our only shareholder is you, the customer”. Well that’s grand, except that the Co-op sells hundreds and millions of pounds worth of ‘debt’ bonds to the big banks (JP Morgan, Barclays, UBS, etc…) regularly on the money markets, and these guys want a return. They won’t invest in the first place unless they see the Coop doing the things they expect to see banks do.
Are you a customer of the Co-op? Have you felt like you had a say in them wasting approx 500 million pounds on an IT system that never materialised? I worked on that project. Three years of project managers, consultants and contractors getting paid huge sums of ‘your’ money, and nothing was delivered. It was obvious from the outset that the company they had awarded the contract to (Infosys) was going to bleed the project for all it was worth, but they just ploughed on, and ploughed more and more money in. In the papers they said it was because of the upcoming ‘Lloyds branch’ deal that they had abandoned the IT development (at a huge loss) – but we had wound up the project in any realistic terms months and months before that. It was PR, and one thing the Coop doesn’t mind spending money on is PR.
For example, the Co-op’s mission statement (at least when I was there a few months ago) was something like ‘To be seen as a credible alternative to the big 5 banks etc…’. The thing to notice here (although I know the wording after was different) is ‘to be seen as’ – Now there is a big difference to being seen as something, and to actually be that thing. I shan’t go into the philosophy of that statement, but it kind of smacks of ‘expectation management’ doesn’t it?
And that leads me onto the next thing. The Coop is awash with middle to higher management, project leaders and ‘change’ management teams who get paid an inordinate amount of money to hold endless meetings while the people you want (those who answer your letters, open your accounts, do the actual work) are the lowest paid, stretched the farthest, and have ancient systems to work on. There is no need for you to wait any time at all for a bank to process your request – it could replace a handful of overpaid ‘yes’ men & women, with hundreds of front-line staff or better systems. But the guys running these places used to be one of the overpaid ‘yes’ men themselves and guess what, they just don’t care!
The poor front-line staff get told to save paper, work faster, be more efficient, be positive and so on, and they are under huge pressure to plug the staffing and capability holes created by the top heavy management. I don’t think this is poor planning, I think it is deliberate. There are inevitable cliques at the top, even in the ‘middle’, and they are concerned about one thing and one thing only – their own pay-packet and bringing their friends along for the ride. The piddly little operations business (the high street branches and so on) pale in insignificance to the vast sums of money they move around every day in the money markets – so where do you think the priorities lie? Funding a good service for small savers and Mortgage customers? No. Not that. If they wanted to do that they could do it tomorrow and be the best bank in business. But they would fold, because like all other banks, they actually rely on a balance of money market transactions, the buying and selling of debts, and (probably) tax manipulation. (For example, the Coop recently built that huge new swooping building in Manchester as the new HQ at a cost of millions of pounds. As soon as it was completed, they sold it and leased it back from another company. That may not be illegal, but it isn’t really that ethical either if it is a loop-hole).
And talking of ethics! When you paint yourself as a saint, you only need to do one un-saintly thing to be shown up. Well they miss-sold PPI folks and have been subsequently fined for not dealing with the complaints. Oh and when it comes to complaints, they score really high for customer service, but it was common knowledge amongst staff that they were let’s say, creative, with the reporting. So they didn’t get hit by the bigger scandals, but they are massively funded by the selling of debt bonds and such like to those banks that did. If the big banks go, the coop would go. So where do you think their priorities actually lie? (The treasurer used to post articles on the intranet informing us of the hundreds and millions raised from bond sales to big banks.) They buy and sell debt like anyone else, in fact, the now defunct purchase of the Lloyds branches was to be funded by a ‘subordinated debt’ loan from the wider Lloyds group! They were going to buy Lloyds, with debt, bought from Lloyds?! What is wrong with this picture?
Anyway. That’s my rant over. It was spurred on by the news today that the Lloyds deal fell through. Something the staff knew was going to happen a long time ago, but the PR department was on full steam, waiting for financial results to be announced and excused (something like 4-6 hundred million losses, caused mostly by the failed IT project that they wrote off as being abandoned because of the Lloyds deal… well, there’s no deal now, so what next?).
I wish the cooperative was the real alternative, but it isn’t It is a huge conglomerate of commercial interests, covering vast swathes of various industries. A real cooperative is simple, inclusive, local with wider ties but connected to its members in a tangible and more direct way. It has become too big, to interested in big money, and focussed on its creditors and debtors. If this is the way, the wrong people are in charge and they are making a fortune while they are at it, like all big companies. So don’t be fooled. Being the best of the worst isn’t good enough. We deserve better.
I may add at this point that this is my opinion, all be it one developed as a former employee, and if you want to substantiate or deny any of the points raised in this blog, you are totally at liberty to do so. I am making no direct claims or accusations and my figures are approximates from memory. This is not an ‘article’ it is a blog about how I feel. Do not take my word for it. Research and see what you find out yourself. I was not a senior member of the group, I was involved in projects at a low level but came into contact with people right up to executive level as a result. I left of my own accord, I wasn’t sacked, and I had a good track record, but all the while I was biting my lip thinking ‘there has got to be a better way! But opinion counts for something. The way we were treated as ‘head count’ units on paper, the way we were internally advertised to at our desks, the rumours and ill-feeling which permeated every corner of the business I came into contact with. That counts for something I’m sure.
Some links. These are from the BBC so are pretty much just re-printed press packs from the Coop with all the spin, but the basic info is there.
http://www.bbc.co.uk/news/business-22276082 (Lloyds deal falls through)
http://www.bbc.co.uk/news/business-20909763 (PPI fine)
http://www.bbc.co.uk/news/business-21879801 (this years losses)