In the first six months of the year the Co-operative Bank recorded an underlying loss and its new mortgage completions fell, compared to the same period of 2018.
The Co-operative Bank saw an underlying loss of £2.8m in H1, compared to a £11.2m profit in H1 2018 and a statutory loss before tax of £38.5m this year, compared to a loss of £39.5m in H1 last year. The bank said its priority remains to return to a sustainable profit as soon as possible.
The bank’s H1 results also showed its new mortgage completions decreased year-on-year from £2.1bn to £1.7bn. Net residential lending was also down from £0.5bn last year to £0.4bn this year.
Andrew Bester, chief executive officer, said: “We’ve delivered a positive first half financial performance that is ahead of expectations, and although loss-making overall, is near break-even on an underlying basis.
“We have seen margin headwinds this year so far, but our safe lending book provides resilience in what is a challenging retail banking market and an ongoing uncertain political and economic backdrop.”
The bank’s core income grew 1% year-on-year. It has seen a reduction in customer net interest margin to 1.83% from 2.08% last year.
It said this is due to reductions in mortgage margins as new business pricing remains competitive, continued attrition of the SVR book and the interest expense attached to the Tier 2 debt.
Total income has remained broadly flat at £191.2m compared to £192.9m from the same period in 2018, which is ahead of expectations.
The lender said net interest margin will reduce further in 2019, due partly to the sustained pressure on mortgage margins.
The bank said it is focussed on reducing operating expenditure and expects 2019 to be ahead of previous expectations due to a reduction in continuous improvement project costs.
As a result it said it anticipates the cost:income ratio to be better than previously guided at less than 110% when it was previously around 115%.
Bester added: “Overall, our business has proved resilient, and as a result we have upgraded our expectations in relation to our CET1 and cost:income ratios for the remainder of the year.
“We are making good progress against our transformation strategy, including investing in our digital capability, the separation of our IT systems from the Co-operative Group and commencing our mortgage and savings re-platforming.
“During the months ahead, we will build on our achievements, focusing on cost reduction, franchise growth and investing for the future to deliver a sustainable, profitable Co-operative Bank.”