The Co-operative Group has scrapped its pre-Christmas dividend payout for 7 million members, following troubles with its banking arm.
Instead, Co-operative members will be offered in store discount vouchers. The decision is part of a review into the customer-owned business, which will also look at ways to simplify the overall dividend policy.
The group’s chairman Len Wardle said, “Our decision not to pay a half-year interim dividend was not one that was taken lightly. But it was viewed as necessary given the challenges facing the group at this time.”
It has also been revealed that business secretary Vince Cable has launched a consultation into whether or not the Co-operative Bank can retain its name following the restructuring plan.
The Co-op Bank will lose 15% of it branches as part of the £1.5 billion recapitalisation plan. The plan also sees hedge funds take a 70% stake in the bank, leaving the Co-operative Group with just 30%.
The rescue deal was necessary following a merger with Britannia Building Society in 2009, which left the bank with bad debts, and after payment protection insurance (PPI) compensation costing more than expected. Even with the rescue deal in place, it is expected that it will take some time before the Co-op Bank returns to making a profit.
The bank also recently announced that it is preparing to sell off its renewable energy lending division as part of the restructuring process in a bid to plug the hole in its balance sheet.