Co-Op Bank Huge Losses

[mikey4444]

http://www.bbc.co.uk/news/

I can't quite understand this. According to the latest news release, this Bank lost £1.3bn last year. If it has lost this eye-watering amount, where is the money coming from to pay staff wages, electric bills, rates, etc ? Why did the Bank not collapse with immediate effect ?

[douglas9401]

Mikey, big business money is completely different from the folding stuff that us proles use.
The business world runs on the idea of money so they can all keep imagining that it's all okay.

[Old_Geezer]

I guess they must have much more in reserve.

[factor-fiction]

It's all down to the differences between different accounting statements such as a one year profit and loss, the balance sheet, cash flow statements. Companies can make a big loss for all sorts of reasons (provision for bad debts, depreciation of assets) which affect the P&L account but still have cash reserves or a strong asset base, although of course continued huge losses make a business insustainable.I think the bond sale a few months ago was to fill some of the gap in teh finnaces

[factor-fiction]

I think I have just invented a new word- insustainable

[youngmafbog]

Real loss is around 400m for the year I think. Quite a paltry sum so it will stay afloat.

The rest is in write downs for potential losses. It appears teh 'ethical' Bank was up to its neck peddling PPP just like the rest - so it will have to pay.

Taking over Britannic BS, in hindsight, was a poor decision. It is riddled with toxic debt.

£1.3 Bn is not a lot these days anyway really is it? I work on a EMEA treasury system that shifts sums much bigger than that in single payments all day.

The Co-op Banks problem is that the co-op only have around 30%, if they cannot service there side there is doubt as to whether the Bank could continue to be call 'Co-op'

[treetops68]

That's a new one on me,ff.

[wolf63]

FF - George W was famous for making up words or mangling existing ones. Is that a hint to your real identity? How's George senior doing?

[mikey4444]

I should say that I have banked with them for 40 years and have never had any problems. Their telephone banking and now, Internet Banking arrangements seem to work very well. Like a lot of people, I rarely go into my local Branch, as the aforesaid Internet Banking seems to work so well. But when I need the counter staff, they are always helpful.

Its just that I can't really understand how any organisation can have a huge loss like this and still continue to operate. OG has suggested that perhaps their reserves are keeping them going. If that is the case, these reserves must be massive, and if that is the case, why do they not fund their losses from the reserves ?

If I am spending more on my household bills, than I have coming in every month, I would have to raid my savings. I could do that for a while but eventually the money would all be gone, and then I would be bankrupt.

I realise that corporate finances are not the same as household finances, but surely the same principle applies ?

[Hopkirk]

Give it a few years and the Coop will be remebered fondly like Woolworths and Comet.

[factor-fiction]

If you produced the Mikey4444 P&L account though you could have income exceeding expenses but still show a P&L loss because your car had depreciate d in value by £2000 or your house value (after several years of growth) had this year been valued as worth £10000 less than last year.

[mikey4444]

Thanks FF ! I wish I hadn't asked this question now !

[BenDToy]

In simple terms, they spent more than they received, but use the reserves to make up the loss. However it is still a loss.
For example, I n a single month it is possible that you, as an individual, have to spend more than you earn (eg the month when your washing machine needs replacing). You may have money in your savings account to cover that month, saved up from previous months where you had some extra (you can call it "profit") so you don't have to for example, not pay the mortgage. But your outgoings are still more than your income, so you make a "loss" in that period.

[factor-fiction]

I agree it's a huge loss Mikey and it's an uncomfortable time for all the staff, most of whom will have worked really hard and are in no way to blame for the poor decisions of a few at the top.
It'll be interesting to see whether any of the 5 former very senior managers will challenge the bank's decision not to pay a contractual bonus totalling several million pounds

[youngmafbog]

A sizable loss maybe, a huge loss. No.

And remember 70% is owned by hedge funds. Now they could be looking to asset strip it and peddle off profitable parts once debt it written off. In taht case it will be bye-bye co-op Bank.

By far the biggest problem is the Co-Op group with losses of around 2Bn, which is large for a small to medium 'retail' company. I agree they may well go the way of Wool worth.

Ethics is all very well, but despite the liberal lefts protestations, it is not profitable and most people simply dont want to pay for it (Same for green taxes, only supported by a loud mouthed minority who want to use otehr peoples money for their own agenda)

[B00]

"f it has lost this eye-watering amount, where is the money coming from to pay staff wages, electric bills, rates, etc ?"

The food side- we're currently holding up the banking side.

[Gromit]

The funeral side has a steady income.

[youngmafbog]

Odd, I heard it was a dying business Gromit :-)

[B00]

We can apparently afford to pay for this as well...

http://www.manchestereveningnews.co.uk/business/property/co-operative-set-transform-manchester-800m-6911167

Of course, come summer bonus time, they'll tell us they can't afford to pay us it again- great company to work for!

[factor-fiction]

The Coop has always invested money in property and in other investments- it has a large property portfolio. It could stop all such investments and pay the money as staff bonuses or in reducing prices or on other things but in the long run it would suffer since it relies on the income it makes from such investments.

[Peter Pedant]

Mikey

The cash flow account is the only one you cant falsify
erm not that I am saying these accts are false.

However if YOU try it - the tax man will only put up with it for two years and then investigate for fraud. FF and I have starred on another thread on this one.