Boss Nick Slape says cooperative bank is back and looking for buyouts

Strategy: CEO Nick Slape plans IPO in 2023

The Cooperative Bank is back. At least that’s what CEO Nick Slape says, who is on the verge of proving that an ‘ethical’ lending doesn’t mean paving the way for financial ruin – something the bank is ‘has been dangerously approached in the past.

“We’re basically on track to generate a profit for the full year,” Slape says. “I actually had to get the team to go back and look at when the bank last made an annual profit,” he adds – only half joking.

To demonstrate the bank’s newfound confidence, Slape, 58, is looking for deals. He stunned the city with a surprise takeover bid for rival TSB in October.

The £ 1billion offer was turned down, but it sent a strong signal to the city: The Co-op Bank hasn’t just recovered, it wants to grow, take on bigger rivals and ride the surf. the wave of ethical loans, now very popular.

In contrast, less than a decade ago it was on the verge of collapse with a £ 1.5 billion black hole. Coincidentally, at the time, he was also unsuccessful in acquiring TSB, withdrawing an offer in 2013 due to his own weak finances.

Things turned from bad to worse when its then chairman, the Reverend Paul Flowers, was embroiled in a sex and drug scandal – revealed by The Mail on Sunday – a blow to the bank so proud of its ethical credentials.

Slape can’t wait to return to the limelight. He believes Co-op needs to add ballast before they can pose a serious threat to the Big Four – Barclays, HSBC, NatWest and Lloyds Banking Group.

“We are a small, mid-tier bank with no scale,” Slape says, pointing to its £ 21 billion in deposits. The BST has £ 36 billion. “You specialize or you have to build muscle. ”

Without size, it is impossible to generate enough profit to cover the enormous costs of running a bank, he explains. These small banks – the “challengers” of the Big Four banks – are considering mergers to overcome this problem.

Last month, private equity firm Carlyle approached Metro Bank about a takeover, although it quickly left.

Slape refuses to divulge any potential targets, but says he’s got his eye on a few – although he’s hinting that TSB is still the first choice. “We want it to be rooted in our type of values ​​and ethics – that’s the key,” he says. Co-op ethics policy prohibits serving oil companies, miners, and businesses that cause climate change. It also excludes tobacco, guns to repressive regimes and other stocks deemed unethical by its customers – a policy since 1992.

Slape looks for targets that homeowners already have an appetite to sell – “the ‘possibility’ of a deal, he says. “If it’s a private equity firm that’s been around for a few years,” he suggests.

Bolting on a specialty could also be an alternative to a full rework.

Analysts believe that the TSB is still the price. Sainsbury’s bank could be a target. The cooperative could also select mortgage portfolios – specialist provider Kensington, for example, was recently put up for sale by its private lenders. Could Slape have another crack at TSB? His Spanish owner Sabadell tried to offload him before withdrawing the process earlier this year.

“We wanted to make it clear that we saw this as a compelling combination for us,” says Slape. “We are similar, we have very similar records. ”

So, is the Co-op Bank in talks with the TSB again? “We respect their position on this. We haven’t talked to them and we don’t talk to them, ”he says, as if reading a script.

He has “no intention” of making a higher bid: “We have made our position clear.

The Co-op Bank may seem like an unlikely aggressor – it too was a target as recently as last year, when US private equity firm Cerberus made a buyout approach.

But he is one of the oldest of the challengers. Founded in 1872 as part of the cooperative group, it is now owned by a consortium of hedge funds and private funds that includes Silver Point Capital, GoldenTree, Anchorage Capital, Bain and JC Flowers. Slape, a die-hard urban banker with senior positions at Deutsche Bank, Lehman Brothers and Lloyds behind him, is the fifth managing director in a decade.

The bank has been bolstered by an increase in mortgage borrowing in the event of a pandemic, fueled by the stamp duty holiday. He was forced to issue a new bond last year to strengthen his safety net, in case he got into trouble.

It is now entering the “next phase” and has developed a new five-year strategy.

“I see 2021 being that turning point. We have seen the end of this kind of loss and restructuring of capital. For me it is really important that the bank can generate profit.

It plans to cut costs to less than £ 300million per year by 2024 and a plan to scale down the bank’s headquarters in Manchester will save around £ 3million per year.

He wants to launch “credit repair” loans for those with bad credit history next year, thereby expanding the customer base.

But he insists: “We are a very conservative bank and we have a very high solvency threshold.

“But, coming back to our values ​​and ethics, I want to serve people who may have a stain on their credit report.”

An IPO could also be considered. He says 2023 is “a reasonable timeframe: two years of profit behind you.”

But Slape admits it, clearly leaving the door wide open for an acquisition: “Let’s face it, £ 25-30 billion [in assets] is always going to be a small waterline.

Despite the recent BST rejection, Co-op Bank may soon get lucky for the third time.

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