Britain’s Co-operative Bank has reported a nearly trebled first-half loss, reflecting reduced income, losses on the sale of assets and the rising cost of turning the business around.
The bank is battling to recover from its near-collapse in 2013, when it reported a £1.5 billion hole in its finances, stemming from bad commercial real estate loans. It later suffered an exodus of top executives including former chairman Paul Flowers, who left following a drugs scandal.
The crisis led to bondholders taking control of the bank, with its long-time owner, the mutual Co-operative Group, relegated to a minority holding.
The bank, the only UK lender to fail a stress test last year by Britain’s financial regulator, said it made a loss of £204 million in the first half, compared with a £77 million loss in the same period the year before.
It booked a £38 million loss on asset sales and saw costs relating to its turnaround rise rising to £102 million, on the back of investment in its systems and processes.
“Addressing legacy issues will continue to dominate financial performance for some time and there is considerable work ahead towards a full recovery,” chief executive Niall Booker said yesterday. “The transformation of the bank remains challenging.”
The bank said it was on track to deliver a plan agreed with the regulator to bolster its capital strength. It had 4.7 million customers but is cutting dozens of branches, selling assets and last year cut 15 per cent of its workforce as part of its turnaround plan.
It reduced its total assets to £8 billion during the first half from £10.8 billion at the end of 2014, resulting in a reduction of £1.9 billion of risk-weighted assets.
Its core Tier 1 ratio, a key measure of its financial strength, rose to 14.9 per cent by the end of June from 13 per cent at the end of 2014.
The bank said the performance of its remaining core bank had stabilised, with current account customer numbers remaining broadly stable and mortgage lending recovering. Co-op Bank also said funds set aside to cover past misconduct and legal risks rose £49 million, including increases to provisions for packaged accounts and mortgages.