The Co-operative Bank returned to profit in the third quarter of 2018. The Bank reported a modest operating profit of £14.3m – a £39.6m improvement on the same period in 2017.
In a statement, the Bank said this improvement was the result of a 14% reduction in operating expenditure, driven by the continued focus on cost efficiency, and an improvement in Net Interest Margin (NIM) following its restructuring and recapitalisation in September 2017.
The Bank also witnessed its highest quarter of mortgage completions during this period, the majority of which has been driven through the platform brand.
Overall, the Bank reported a pre-tax loss of £87m for the first nine months of the year, a £20.7m improvement compared to a 2017 Q3 loss before tax excluding the impact of the restructuring and recapitalisation of £107.7m.
Chief executive Andrew Bester said: “As the newly appointed CEO I have spent the first three months understanding where our strengths lie, and where we must improve as we look to re-energise the Co-operative Bank franchise.
“I have been struck by the extraordinary commitment of our colleagues who continue to serve our customers with distinction and how the values of the Co-operative Bank continue to be embedded in the attitudes and behaviours of our colleagues despite the challenges we have faced. We will focus our energy on a multi-year transformation to fully restore our leading position as an ethical Bank. Key to our future will be investing in digital capabilities for our customers.”
He added: “This is the first time the Bank has published a quarterly update since Q3 2016 following the recapitalisation in September 2017. The Bank has had a positive third quarter, and despite continued competition in the market, our mortgage originations have remained strong with the highest quarter of completions in five years. We have launched new propositions to better support first time buyers, including help to buy. Margins are stable with NIM improving year on year, and we achieved a small operating profit supported by strong cost discipline.”
The Bank is in the process of full IT separation from the Co-operative Group, which sold its final stake in the Bank in September 2017.
It is now owned by hedge funds but has been allowed to keep its name, so long as it adheres to its ethical policy and commits to co-operative values. Continued links to the movement include its support for the Hive, a support service for co-ops delivered by sector body Co-operatives UK.
In terms of capital requirements, it had a Common Equity Tier 1 ratio (CET1 ratio) of 22.7% at the end of Q3, above the minimum 6% set under the Bank of England’s Capital Requirements Directive IV.
“Our branch and contact centre teams continue to provide strong service that we know is valued by our customers and we will seek to preserve this as we also develop the digital services that support their everyday banking needs,” added Mr Bester. “Re-energising our ethical brand will be a priority as we move into 2019.
“We are looking to build on our strong heritage in the SME market in the year ahead and as part of that we are considering our options regarding the RBS alternative remedies fund.
“With our loyal customer base, committed colleagues and strong heritage based on the values of the co-operative movement, we continue to offer customers a different choice and we are well placed to move forward towards future success.”