Co-op Bank posts another large loss as it battles against ‘political uncertainty and intense competition’ but sees light at the end of the tunnel
The Co-operative Bank’s adjusted loss before tax increased from £140.3million to £140.7million in the last year, as it battles to restore order to its balance sheet.
But there is a chink of light for the bank as with one-off costs taken out the lender managed to edge into an operating profit for the first time in five years.
Chief executive Andrew Bester said the group had achieved a ‘key milestone’ in swinging to a £14million operating profit last year, which comes after its £700million rescue deal with hedge funds in 2017 that saved the troubled lender from near-collapse.
Numbers: The Co-operative Bank’s adjusted loss before tax increased from £140.3million to £140.7million in the last year
Mr Bester added: ‘The backdrop of political uncertainty and intense competition has created an extremely challenging banking environment but, despite this, we have made sizeable progress in the bank’s transformation this year, reaching a key milestone by recording an operating profit for the first time since 2013.
‘While our ongoing investment in transformation means continued losses overall, this is nevertheless an important step towards achieving our goal of sustainable profitability.’
On a bottom-line basis, the lender edged deeper into the red with pre-tax losses of £140.7million for 2018 against £140.3million in 2017 after taking further mis-selling charges and investing in IT.
The bank said pre-tax results were affected by another £31.7million for customer compensation, largely for payment protection insurance, as well as investment costs of £112.9million amid an IT overhaul as it separates its systems from the broader Co-operative Group.
The 2017 rescue deal saw it effectively sever its historic relationship with the Co-operative Group as hedge funds seized control of the lender.
Mr Bester said the group was on the road to recovery, with 2018 seeing the best year for mortgage completions since 2010 with lending on a net basis of £1.4billion.
The bank saw a fall in the number of current account customers last year, which it said was largely due to a drop in dormant accounts, with the value of current accounts holding steady.
Looking ahead to 2019, the Co-op said it wants to ‘diversify our product offering to service the needs of our customers better’ and further strengthen its business account offering.
But it cautioned its net interest margin – a key measure of profitability for retail banks – was set to fall in 2019 amid sustained competition in the mortgage market.
The Co-op recently lost out in the first round of Royal Bank of Scotland’s £775million fund which is aimed at increasing competition in Britain’s banking sector. But it has the chance to apply for second, but smaller, pool of RBS funds.