Co-op Bank reports pre-tax loss of £611m

The Co-operative Bank has announced annual losses of £610.6m before tax for the year ending 31 December 2015 – more than double the previous year’s loss of £264m....

The Co-operative Bank has announced annual losses of £610.6m before tax for the year ending 31 December 2015 – more than double the previous year’s loss of £264m. In its annual report, posted on 1 April, the bank says the loss is “expected” and that it reflects “issues of the past”.

The Bank’s income dropped last year following the sale of riskier assets in an attempt to return the Bank to health. It also took on extra charges of £72m for the payment protection insurance (PPI) mis-selling scandal and additional costs of about £99m relating to breaches of consumer credit rules.

The Co-op Group's head office at One Angel Square in Manchester.
The Co-op Group’s head office at One Angel Square in Manchester.

In 2013, a £1.5bn capital hole was exposed at the Co-operative Bank, which led to the separation of the Bank from the Co-operative Group, the Bank being floated on the stock exchange, and the eventual reduction of the Group’s stake in the Bank to 20%.

Read more: Nine Problems that caused the Debacle at the Bank

Niall Booker, Co-operative Bank CEO, said: “In 2015 we have been successful in improving capital resilience, reducing costs and strengthening the performance of the Core Bank and the expected widening of our financial loss compared with 2014, due to legacy issues we have known about and highlighted for some time, should not distract from the considerable progress made in turning the Bank around.

‘We expect a return to operating profitability in the Core Bank before the end of 2017’

“The work done in de-risking and simplifying the Bank means the business is much stronger than a year ago and, in particular, the continued strengthening of the performance of our retail franchise is encouraging for the future.”

Losses in its Core Bank were down in 2015 to £14.9m, compared with £78.6m in 2014, while its number of current accounts remained “broadly stable”. The Bank bolstered its capital buffer above 15.5%, up from 13%, as a result of the asset sales, and it accelerated plans to improve its capital reserves after becoming the only lender to fail the Bank of England’s stress tests in 2014.

Save Our Bank campaign launches Customer Union for Ethical Banking

Mr Booker added that while the Bank is expected to report a loss over the next two years, “we expect a return to operating profitability in the Core Bank before the end of 2017”. Mr Booker’s contract expires at the end of 2016, and the Financial Times has reported that some senior bankers have already been approached about the role.

In January 2015, the Bank relaunched its ethical policy, saying it was “proud of its co-operative roots”, that it was “committed” to those co-op values and would seek to support the sector, in part through its continued membership of Co-operatives UK. This spring the Bank and the sector body also teamed up to launch The Hive, a three-year co-operative development initiative valued at £1m.

The Palestine Solidarity Campaign joins a demonstation in Dublin
The Palestine Solidarity Campaign joins a demonstation in Dublin

But the Co-operative Bank has also come under fire from co-operatives for closing the current accounts of solidarity campaigns associated with Palestine, Cuba and Nicaragua, a move which Shaun Fensom of the Save Our Bank campaign says was handled badly.

“This is undoing the good work the Bank’s done to rebuild trust with its expanded ethical policy, its generous funding for co-op development and bold moves like signing the Paris Pledge to steer clear of the coal industry,” he said.

“The Bank is saying it has regulatory obligations to make sure that when money is transferred to high risk locations it doesn’t get into the wrong hands. We can understand that may be an issue, but rather that telling account holders where the problem is or suggesting ways of fixing it, they’re just closing accounts. We want a bank with ethics to try harder than that.”

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