Co-op Bank

[Retiree01]

Another significant fall for 77UQ as well as 42RQ. Has anyone seen any recent relevant development(s)?

[youfoolishboy]

Not seeing the significant fall in the 42RQs they have been going lower for ages on no news.

[Holts]

There has been a decline over the past few weeks but nothing significant in the last few days that I can see , however have bought some in the last week , the bank is creaking so the risk is clear but the return seems acceptable , only one per cent of current portfolio value though .

[Surerera]

Been thinking about getting back in to 77UQ, does anyone know if there's a price in the equity? with 10 month senior trading at 15% I would guess the equity is worthless.

Surerera

[Surerera]

I'm struggling to understand the pricing of Co-op Bank bonds, the senior with 10 months to run is yielding about 15.8% and the sub debt with 7 years to run is yielding about 14.8%. Surely the Senior is pricing in a haircut and in which case the subs should surely be toast? Tell me where I'm going wrong here.


Surerera

[Holts]

It has not made sense for some considerable time and the Senior has continued to fall , I was not willing to stump up the minimum 45k required , but that is no reason for the disconnect , just can not explain it . Surely the price of the sub would be so much lower than it is if the read across from the senior was correct ?

[Laughton]

Could it be that the seniors are really only followed (owned) by professional/experienced/institutional investors becasue of the 50k minimum dealing limit and that these invetors have a better feel for the real value of co-op bonds whereas the price of the subs is being supported by smaller holders who have held for some time and have been happy collecting the coupons and assume that the banking crisis is all over and done with now??

I can't really think of another reason. As you say, it shouldn't be happening.

[Kr1ck]

I really can't see the Coop being allowed to go to the wall and senior being bailed in at this point. When we are trying to say everything is rosy after Brexit revisiting the banking crisis over such a small bank would be crazy. However, it would seem professional investors are not so sure (but didn't they all make us rich by dumping everything last time? ...Bradford and Bingley bonds at 4p... I thank them to this day )

[amateur]

Test.
Good to have a meeting place. Brexit shall provide a lot of material...

[Wizard]

I really can't see the Coop being allowed to go to the wall and senior being bailed in at this point. When we are trying to say everything is rosy after Brexit revisiting the banking crisis over such a small bank would be crazy.

I wonder whether the Brexit situation is actually a good thing or not, with so much else of more importance out there to dominate the news would a small bank like Coop going to the wall be big news? Not a challenge, a genuine question.

Terry.

[youfoolishboy]

Kr1ck
I would not be so sure about bail ins being prevented. I had a similar thought a while back on TMF Banking board and mentioned it and OBR was very quick to point out the world has changed and who would know more than he?

[Colevan]

It is very confusing as 42TE's are in great shape yet the 42RQ are quite the opposite. I cannot find a daily volume indicator for either and if any one has that info it would be very interesting to see actual movements.

[hiriskpaul]

It is very confusing as 42TE's are in great shape yet the 42RQ are quite the opposite.

Co-op Group now only holds 20% of the Bank's shares and is under no obligation to inject more capital. The Group is now in a much stronger position than it was 3 years ago, with profitable businesses, reduced debt and improved corporate governance, hence the yield on 42TE being around 6.5% instead of the 15% or so of 42RQ. If the PRA loses patience with the Bank and threatens resolution I suspect that the Group, along with other shareholders, very well may stump up cash. Shareholders did this once before, although the Group tail swallowed instead, a few months after the restructuring. However if that happens again shareholders might make any new cash injection conditional on the sub debt holders taking a haircut.

[88V8]

It is very confusing as 42TE's are in great shape yet the 42RQ are quite the opposite. I cannot find a daily volume indicator for either and if any one has that info it would be very interesting to see actual movements.

Here
http://www.shareprice.co.uk/42TE/CO-OPE ... %7C12%7C25
it indicates a piddling current volume for 42RQ and c40,000 for 42TE.

The dataset on this site is however erratic and sometimes missing, especially out of hours.

V8

[Retiree01]

The 2 year extension of the requirement to raise sufficient MREL funding - see http://www.bankofengland.co.uk/publicat ... 6/082.aspx - seems very good news for the Co-op Bank - 2 years later in their recovery phase they may look significantly different.

Not the only problem they have, but hopefully particularly significant for 77UQ.

I am full to my risk capacity on this one.

[Surerera]

Found this conversation on Twitter between Mark Taber, Loglorry and WShak https://mobile.twitter.com/WShak1/statu ... 059584?p=v

Not encouraging reading from 3 smart posters so I'll give the senior a wide berth.


Surerera

[Retiree01]

I have just seen that Fitch have affirmed the senior rating at 'B'. Multiple downside risks enumerated, with low expectation for short term improvement in rating, but stable outlook maintained.

Suspect 'B' rating is somewhat at odds with 77UQ's yield.

[hiriskpaul]

Found this conversation on Twitter between Mark Taber, Loglorry and WShak https://mobile.twitter.com/WShak1/statu ... 059584?p=v

Not encouraging reading from 3 smart posters so I'll give the senior a wide berth.

Surerera

WShak's comment was "I agree re-structure more likely, probably extension of maturity, which makes YTM based on 09/17 meaningless"

Far be it for me to question WShak here, but I am at a loss to understand why he thinks this way. The 2017s represent £400m of senior funding at a semi-annual interest rate of 5.125%, but the Bank has over £20B in deposits at substantially lower cost and judging by the rates they are offering, does not appear to have trouble attracting deposits. If anything, I would have thought that the Bank would like to be shot of the 2017s asap.

[hiriskpaul]

I have just seen that Fitch have affirmed the senior rating at 'B'. Multiple downside risks enumerated, with low expectation for short term improvement in rating, but stable outlook maintained.

Suspect 'B' rating is somewhat at odds with 77UQ's yield.

Do you have a link? I just checked the ratings page and they have not updated yet:

http://www.co-operativebank.co.uk/inves ... ditratings

[hiriskpaul]

As an example of the current deposit rates, their current 1, 2 and 3 year retail fixed rate products are offering 0.95%, 1.05% and 1.2%. These are quite some way below current "Best Buys". You can get 1.0% on up to £1m instant access at NS&I!

It would not take much to suck in another £400m (should they need it).