The Co-op banking arm reported a £1.3 billion annual loss today as it warned its legacy issues will continue to hit its financial performance for some time.
The business, which is now under the control of bondholders following a refinancing to fill a £1.5 billion hole in its balance sheet, said it expects to make losses during this year and in 2015.
Chief executive Niall Booker said management kept the bank alive during 2013 but that there were still "significant issues" which need to be resolved.
The business added that £5 million of deferred payments will not be made to former executives who left the bank prior to its collapse.
It also emerged in the annual report that Booker was paid £1.7 million last year, including £943,000 as a fixed allowance "that takes account of the broad range of specialist skills required of the role".
The allowance is equivalent to £140,000 per month and is payable quarterly up until June 2015, the Co-op said.
Booker, who took the role in June, said he plans to simplify the business, reduce costs and return the bank to its roots in focusing on retail and small and medium-sized business customers.
However, the recovery was dealt a blow last month when the Co-op revealed it needed to raise another £400 million from shareholders in order to cover compensation costs, including for PPI redress.
It meant the starting capital position of the bank in its five year recovery plan was weaker than in the plan announced last year.
If the wider Co-op group, which is still the largest shareholder in the bank, chooses not to take part in the proposed rights issue to raise £400 million it will see its own interest in the business shrink again.
Booker, a former HSBC executive, said he was "very confident" the bank will raise the money required, even if the Co-op group does not participate in the cash call.
The fundraising is expected to lift the bank's capital ratio - a measure of its financial strength - to around 9.8%, compared with the current 7.2% and the regulatory minimum requirement of 7%.
Today's loss of £1.3 billion relates to the bank's bad assets, such as those acquired from its ill-fated takeover of the Britannia building society, as well as conduct and legal risks of £412 million.
Despite the high-profile issues at the bank, the Co-op said its number of current accounts rose slightly to 664,775 by the end of the year, while retail deposits were down by less than 1% at £27.9 billion.
The £5 million of withheld payments from former directors and senior executives relate to performance targets which have not been met as well as from some of the legacy issues at the bank.
Booker, who has pledged to stay with the bank until its position stabilises, said he had worked with the bank's board to ensure a significant proportion of his remuneration is tied to the improved performance of the bank.
The bank has been at the heart of the wider group's difficulties ever since a £1.5 billion black hole was discovered in its balance sheet last year, quite apart from the drugs scandal involving former chairman Paul Flowers.
John Gorle – Usdaw’s National Officer for the Co-op said: “The problems at the Co-operative Bank have been a real concern for some time and we were saddened to see the Co-operative Group lose control of it, which raised many questions over the future ethos and strategy of the bank and on the wider Group’s businesses.
“In addition to the problems with the bank the much publicised instability at main board level with recent resignations over the future direction and governance of the Group is causing more uncertainty for our members. Adding to that uncertainty are the rumours of job losses and the proposal to sell the retail pharmacy business.
“Whilst there will be no quick fix for the problems at the Group there is a growing anxiety with our membership over long-term job security going forward. The Co-op needs to present a clear and coherent strategy for the future as soon as possible to help address our members concerns."Suggest a correction