The Co-operative Bank – whose brands include Smile and Britannia – is closing its doors to new business customers.
As the mutual attempts to repair its balance sheet from the toxic loans acquired from Britannia Building Society, it will pull back from new commercial lending, damaging government hopes that business lending would grow in the coming months.
Euan Sutherland, group chief executive of the Co-operative Group explained that the decision is part of the commercial strategy to play to the ‘traditional strengths’ of the bank.
He added: “It will enable us to focus our energies and capital on both supporting our existing corporate customers and on growing our presence in the retail banking market.”
The news comes just days after the mutual bank pulled out of a deal to buy 630 branches from Lloyds Banking Group citing its obligation to members. Analysts suggest the deal would have cost the bank upwards of £750 million.
The group’s bonds were also recently downgraded by six notches to junk status by credit ratings agency Moody’s.
In March, the Bank reported losses of £634 million for 2012 and had outstanding loans of £33.4 billion. It is currently undergoing a review of all of its financial services operations as the mutual seeks to rebuild its capital adequacy rating.
Media reports suggest that the bank is locked in ongoing talks with the City watchdog – the Prudential Regulation Authority – about a possible corporate restructure.
The bank’s chief executive – Barry Tootell – resigned this month and his responsibilities have been assumed by Rod Bulmer, who has taken the role of acting CEO and a director until a permanent replacement is announced.