A new chief executive is set to take over at the Co-operative Bank in January, as the organisation announces a loss in the first half of the year.
The bank reported a loss of £177m in its interim results for the six months to 30 June 2016. In a statement it said that while results were “ahead of plan”, it incorporates some significant items such as a gain from the sale of a share in Visa Europe (£58.1m). The bank’s operating expenditure was reduced from £262.9m last year to £222.8m.
In March, chief executive Niall Booker announced his intention to leave, and his deputy, Liam Coleman, is set to replace him on 1 January. John Worth is to succeed John Baines as chief financial officer in September, subject to regulatory approvals.
It also announced that the Co-operative Group – as the bank’s largest shareholder – has taken up its right to appoint a non-executive director. Alistair Asher, general counsel, will join the board from 12 September.
On the bank’s performance, Niall Booker said: “The progress made during the first six months of the year has delivered a small Core Bank operating profit for the second successive half year period with mortgage originations remaining strong, an improved current account proposition, customer satisfaction scores at their highest level since 2013 and widening jaws between income and costs. In addition, with further investment in our digital channels to modernise the business around how customers want to bank today and significant progress on our major transformation and remediation programmes, much has been done.”
He added: “We have always been clear that turning the Bank around would be a significant journey of at least five years and so far the overall story remains one of progress and improvement. Much has been achieved in de-risking the Bank, in strengthening our resilience, in improving our IT platform, in demonstrating our values and ethics in action and in ensuring good outcomes for customers. Despite the challenges ahead, we continue to make progress building a differentiated, resilient bank which is valued by our customers for the quality of its service and I would like to thank colleagues for their hard work and dedication in meeting our customers’ needs.”
Looking forward, Mr Booker said the UK’s decision to exit from Europe brings a level of “uncertainty” that could restrict the bank’s growth in the short-term.
He said: “As noted by others, today’s market conditions are challenging for all retail-focused banks and the macroeconomic uncertainty following the result of the EU referendum, including the likelihood of lower for longer interest rates, may restrict our ability to grow revenue in the short term.”
The bank said it is still in the process of separating from the Co-operative Group, following the discovery of a £1.5bn capital black hole in 2013. Currently, the bank depends on the Group to provide a number of services including IT, personnel, assets and to on-supply certain services, data and assets by third party suppliers. It added that the ongoing separation project is complex and may be more costly than currently contemplated. A provision of £33.6m is being held against separation costs.
In its risk register, the bank also noted that it continues to rely on The Co-operative brand and carries the risk that this brand may be damaged as a result of matters affecting The Co-operative Group or other co-operatives.
It also noted that it owns The Co-operative Bank trademark, but acknowledged that the right to use the term ‘co-operative’ could be challenged or removed by the secretary of state for business or the FCA. “The Bank manages this risk,” it said, “through its actions and commitment to the established values of the co-operative movement, as demonstrated by the embedding of co-operative values and ethics in its articles of association and its ethical policy.”
This was most recently shown through its pledge of £1m towards Co-operatives UK’s business support programme, The Hive.
The bank also added that it is working with the Co-operative Group to negotiate a more detailed agreement around branding.