The Co-operative Bank reported an underlying loss before tax of £44.6m in the six months ended 30 June 2020, up from £38.5m in the previous year. The bank said this was an anticipated loss at this point in its turnaround plan.
Chief executive Andrew Bester attributed the loss to a “challenging market” marked by the fall in the base rate to a historic low level in March.
He said: “I’m proud of the work of all colleagues in providing our customers with the reassurance and financial support they need in these difficult times.
“Whilst we have reported an underlying loss in this period, as expected in our plan, our franchise continues to show resilience, with positive growth in balances and new customer numbers. The significant progress made in transforming the Bank over the last few years means we entered this period of economic uncertainty in a position of resilience, with a strong CET1 ratio, strengthened IT infrastructure, and a low-risk credit book. In addition, our distinct ethical brand is resonating with customers at a time when community and co-operation have rightly had renewed importance for many people.”
The bank offered net residential lending of £360m and net SME lending of £136m while also introducing a series of initiatives to support customers during the Covid-19 crisis. During the first six months of 2020, it approved over 16,000 mortgage payment deferrals and 2,700 loans and credit card payment deferrals. It also made £498k of charitable donations in this period.
To address the fall in the base rate, the Bank introduced measures to reduce operating costs and reprioritise investment spend.
“This also means that issuing MREL-qualifying debt, an industry-wide regulatory requirement to build additional capital for the future, remains more challenging at the current time. We delayed our plans to issue MREL in the first half of 2020 due to adverse wholesale market conditions and because our strong CET1 ratio allowed us to do so. Nevertheless, we are committed to achieving our future MREL obligations by January 2022, with the first issuance targeted before the end of this year, and our shareholders continue to be supportive,” explained Mr Bester.
He added that developing the small business banking service alongside the retail bank remained a priority for the bank.
“[..]I’m delighted with the momentum we’ve achieved over the period, attracting new customers and a 16% share of the incentivised switching market. We are pleased to have been able to support c.6,000 business customers with Bounce Back loans and the Coronavirus Business Interruption Loan Scheme (CBILS). More widely, customers have increased the deposits they hold with us over the period, and, whilst we supported over 18,000 customers with payment deferrals in the initial period of lockdown, only a small proportion have applied for an extension. All of this is indicative of our low-risk customer base and cautious customer behaviour as they plan ahead.
“Banks will continue to have an important role to play in continuing to keep the economy moving and more widely in supporting the communities around them. I am pleased with how we have played our part in responding to the emerging needs of our customers, in our support for our long-standing charity partners and for 55 small community organisations who perform such vital roles. The values and ethics of the co-operative movement are central to everything we do and we are committed to continuing to support as much as we can as the nation looks to recover from the effects of the pandemic,” added Mr Bester.
Formerly owned by the Co-op Group, the bank continues to operate under its existing name and funds co-operative training and development through the Hive, a co-op development programme delivered by Co-operatives UK.