The Co-operative Group signalled its determination to stabilise its troubled banking arm after a credit downgrade and concerns about its capital levels with the announcement of two senior appointments on Wednesday.
Richard Pennycook, the former finance director of supermarket chain Wm Morrison, was named the group’s new finance director, succeeding Steve Humes, who stepped down recently.
The mutually owned conglomerate, whose activities range from food retail to funerals, has also appointed a new non-executive chairman for its financial services arm and bank. The role will be taken by Richard Pym, a former chief executive of Alliance & Leicester and current chairman of UK Asset Resolution, the government-owned organisation created from parts of nationalised lenders Northern Rock and Bradford & Bingley.
Mr Pym will chair both the Co-operative Banking Group, which includes insurance and asset management in addition to banking, and the Co-operative Bank. He succeeds Paul Flowers, who the Co-op said was “stepping down”. Mr Pym will retain his UK Asset Resolution post.
The Co-op needs to bolster inadequate capital levels at its bank, whose debt was downgraded to “junk” status by Moody’s, the credit rating agency, last month. Analysts at Barclays estimate that the capital hole could be as big as £1.8bn.
The Co-op’s financial services arm has acknowledged its need to strengthen its capital position and is considering various options to bridge the deficit. It has already appointed Niall Booker, an HSBC veteran, to lead the stabilisation effort as the new chief executive of the Co-operative Bank.
“We are clearly focused on actions to strengthen the bank’s balance sheet and resolving the current underlying issues,” Mr Pym said on Wednesday.
The selection of Messrs Pennycook and Pym was a “safe pair of hands-[type] appointments,” said Ian Gordon, analyst at Investec Securities.
Mr Pym’s experience at UKAR, where he was responsible for running down the loan books of Northern Rock and Bradford & Bingley, could prove valuable as the Co-op Bank gets to grips with bad loans inherited from the Britannia building society it purchased in 2009. Meanwhile, the recruitment of Mr Pennycook could prove a fillip for the Co-op’s grocery business which is trying to reverse sluggish sales.
Mr Pennycook won plaudits for his time at Morrison, where he was instrumental, along with former chief executive Marc Bolland, in driving the turnround of Britain’s fourth-biggest supermarket chain by market share. He has also been involved in other revamps, including at the RAC. Mr Pennycook also has a reputation as a safe pair of hands in the finance role.
Clive Black, analyst at Shore Capital, said Mr Pennycook was a “turn round specialist” and a “very good and appropriate appointment for that job”.
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