Co-op bank to quit social housing

The Co-operative Bank has confirmed it will exit the social housing market after a turbulent year.

In its recent financial statements, which revealed a £1.3 billion loss, it designated involvement with housing associations as a ‘non-core activity’.

A spokesperson confirmed this means it will now move to end its dealings with housing associations, and has already got in touch with its clients to consult on its plans for exit. A handful of landlords which remain in the core pile will continue to have dealings with the bank.

Tony Stacey, chief executive of South Yorkshire Housing Association, said the 6,000-home landlord had used the Co-op as a clearing bank but would now transfer to Barclays.

He said SYHA has two loans totalling £1 million with the bank, but does not yet know what will happen to them.

‘It is sad that an ethical bank that would make such an obvious choice for housing associations is no longer available,’ he said.

Sarah Gooden, a partner at law firm Trowers & Hamlins banking department, said the bank would have to respect its existing contracts and could not call in or cancel loans.

‘They are likely to try to find somebody to buy their loan book off them,’ she said. ‘One issue for their customers is that they are not going to be concerned about getting new business.’

She said this could mean the bank would be reluctant to approve mergers, or loans to subsidiaries and may look to call in or reprice loans due to technical breaches of covenants.

The Co-op’s loan book with the sector largely consists of small loans to small and medium-sized landlords and some syndicated loans of up to £50 million.

It picked up the housing association loan book of Britannia Building Society when it took over the company in 2009.

Howard Webb, a director at consultancy Capita, said: ‘Any loss is negative, but I don’t think they were ever a huge player in the market.’

The Co-operative group revealed a £2.5 billion annual loss last week across all its services, the worst in its 150-year history.

The group lost control of the bank in December last year  to US hedge funds. It retains a 30 per cent share in the bank

In May last year, a £1.5 billion black hole in the banking arm’s finances was revealed, which has become the £1.3 billion loss.

UPDATE: A spokesperson from the Co-operative said on Monday that the bank will continue to support its social housing customers that typically have turnover of less than £25 million and borrowing requirements of less than £5 million, and consider new customers based on the same criteria.