Co-Op Losses More Than Double

Co-operative Bank's annual pre-tax losses have more than doubled to £610m, up from £264m in 2014.

Conduct and legal risk charges increased to £193m, because of higher provisions for the mis-selling of payment protection insurance.

The bank almost collapsed in 2013, after bad property loans contributed to a £1.5bn hole in its finances.

Since then, it has taken action to shore up its finances and says it is much "stronger" than a year ago.

It said it had improved its balance sheet and reduced its operating costs through 58 branch closures and staff cuts.

The Co-op Bank was the only lender in 2014 to fail the Bank of England's key test of capital strength, which assesses the ability of major UK lenders to withstand another financial crisis.

Chairman Dennis Holt said the statutory loss and low-interest-rate environment meant the bank would take a year longer than expected to reach the levels of capital strength required by regulators.

He said the bank had disposed of more than half of its higher-risk mortgages in its Optimum portfolio, which was done to protect capital reserves.

At first sight, the doubling of losses at the Co-op looks like further depressing news for a bank where "catastrophe" became a routine word.

The discovery of black holes in the accounts, a failure to meet Bank of England stress tests, announcements that were misleading, poor governance and even a drugs scandal are all part of recent history.

The continuing pay-outs for PPI mis-selling have not helped its battle to return to profitability.

But riskier parts of the business have now been sold off, customers are not deserting like they were, and the bank's capital base is more solid.

In the bank's core operations, losses have been cut from £79m to £15m.

Niall Booker, the boss, has promised to make a profit by the end of next year.

All those hedge fund managers that now own the bank will be willing him to triumph.

Niall Booker, chief executive officer, said: "Whilst the Bank as a whole will report a loss before tax in 2016 and 2017, we expect a return to operating profitability in the core bank before the end of 2017."

Its core bank operation saw operating losses of £15m in 2015, down from £79m the previous year.

Mr Booker's contract runs until the end of 2016, but the lender has not yet announced a replacement, despite reports that approaches have been made to other senior bankers.

The bank lost 329,000 retail current account holders in 2015 and now has 3.8 million customers.

Christopher Wheeler of Atlantic Equities said: "The Co-op Bank is in an extremely competitive market. The events of the last few years have tarnished its reputation and put off customers previously attracted by its history and ethical banking policy. It needs to have something else to offer to bring in meaningful returns in the future."

A group of hedge fund investors bought a majority share in the bank in 2013, leaving the Co-operative Group with just 20% of it.


April 2016