Co-operative Bank cuts losses

Robyn Hall

August 19, 2016

scissors cut

The Co-operative Bank has reported a fall in operating losses to £177m, down from £204.2m last year.

Results published yesterday show its pre-tax H1 operating losses fell considerably.

Current mortgage remediation activities increased in H1 2016 and the existing programme was 91% complete at the end of June 2016.

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The results were influenced by the sale of the bank’s share in Visa Europe, and its £97.2m merger with Britannia Building Society.

Niall Booker, chief executive officer of the Co-operative Bank, said: “The progress made during the first six months of the year has delivered a small core bank operating profit for the second successive half year period with mortgage originations remaining strong, an improved current account proposition, customer satisfaction scores at their highest level since 2013 and widening jaws between income and costs.

“In addition, with further investment in our digital channels to modernise the business around how customers want to bank today and significant progress on our major transformation and remediation programmes, much has been done.

The business has completed a move of its technology systems to a new data centre operated by IBM, and reduced overall total operating expenditure reduced to £222.8m for H1 2016.

Conduct and legal risk charges cost £21.1m in H1 2016, down from £49m in H1 2015.

The bank’s 30 June 2016 total capital ratio stood at 19.7% compared to 21.6% at the end of 2015.

Booker added: “As we’ve said many times before, addressing the Bank’s historic legacy issues will continue to impact our overall financial performance until the end of our plan period. The headline losses and the resulting reduction in the Bank’s Common Equity Tier 1 ratio were therefore flagged previously, and while losses have reduced year on year, the potential for headwinds in the economy as a whole presents further challenges.

“Spending on the continued delivery of our significant remediation and transformation projects has been higher than planned during the first half of the year but the bulk of this spending is offset by other one-time gains in H1. The increasing focus of future project spend will be on those projects generating a positive net present value, and which are more focused on business needs going forward than remediating past problems. This is positive.

“As noted by others, today’s market conditions are challenging for all retail focused banks and the macroeconomic uncertainty following the result of the EU referendum, including the likelihood of lower for longer interest rates, may restrict our ability to grow revenue in the short term.”

Liam Coleman is scheduled to succeed Niall Booker as chief executive officer of the bank on January 1 2017. Subject to regulatory approvals John Worth will also succeed John Baines as CFO in September 2016.