Co-op Bank announces it needs additional £400m

From BBC News:

The Co-op Bank plans to raise another £400m by issuing new shares following the discovery of additional costs related to past misconduct and poor documentation.

The biggest part of the additional costs relates to PPI mis-selling and lapses in the provision of mortgages.

The bank said the discovery meant it would make a loss of £1.2bn to £1.3bn for 2013.

It will release its accounts in April.

“The starting capital position of the bank for the four to five year recovery period is weaker than in the plan announced last year,” said chief executive Niall Booker.

Mr Booker said the issues had already been discovered in its Liability Management Exercise prospectus, but said it was only now quantifying the financial impact of some of the risks.

“When I heard about this my jaw dropped because I did think this was a bank on the way to recovery,” said BBC economics editor Robert Peston.

The Co-op Bank had to be rescued last year after it was left with a £1.5bn capital shortfall, with many of its troubles stemming from the merger with the Britannia building society in 2009.

In November last year, it announced that a group of private investors, made up mostly of hedge funds, would inject nearly £1bn into the bank in exchange for a 70% ownership stake.

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