Co-op Bank vows return to profitability as losses narrow

Andrew Bester

The bank recorded an operating profit of £14.9m, compared with an £84m loss in 2017.

However, it remained loss-making overall thanks to costs such as compensating customers for mis-selling payment protection insurance and improving its IT systems.

The group posted a statutory loss before tax of £38.5 million for the six months to June 30, an improvement on the £39.5m loss a year ago.

It also reported an underlying loss of £2.8m, compared with a £11.2m profit for the same period last year.

The bank said the losses were “favourable to expectations” and its priority was to return to profit as soon as possible.

Customer net interest margin was lower at 1.83 per cent, compared with 2.08 per cent this time last year, due to reductions in mortgage margins amid the competitive market.

Despite its name, the Co-operative Group no longer owns the bank, which was taken over by bondholders in 2017.

The bank first ran into trouble after the 2009 takeover of Britannia Building Society left it nursing a vast pile of bad property loans, and its problems were exacerbated by a lack of banking expertise among directors.

Chief executive Andrew Bester, who took the helm last summer when he became the bank’s fifth chief executive in seven years, said: “We’ve delivered a positive first-half financial performance that is ahead of expectations and, although loss-making overall, is near breakeven 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 also updated its expectations for the year, saying customer net interest margin will reduce further in 2019 to about 1.7 per cent, compared with previous guidance of up to 1.8 per cent.

Reductions in operating expenditure will be ahead of previous expectations, while efficiencies in the investment portfolio mean total cash spend will be lower than anticipated at between £140m and £150m.