The Co-operative Bank reduced its losses in 2014 despite paying out compensation for payment protection insurance (PPI) mis-selling, investing in IT infrastructure and repairing its £1.5bn shortfall. Its results for the year ending 31 December 2014 showed its statutory loss before tax was £264.2m, ‘considerably better’ than the £632.8m it lost in 2013.
The operating loss was £55.3m in 2014 compared with £662m in 2013. Total operating costs were £594.6m in 2014 and £655.9m in 2013.
Conduct and legal related charges, including for PPI mis-selling, were £101.2m, compared with £411.5m in 2013. To further cut costs, the Bank will shut 57 branches in 2015, following the closure of 72 last year.
Chief executive Niall Booker said: “We end the year with a strengthened capital position, ahead of schedule in the reduction of non-core assets and having made progress reducing underlying costs and improving the day-to-day management and governance.
“However, we’re in the early stages of the turnaround and there’s still much to do to transform the organisation into a sustainable business. There are a number of matters where the Bank does not yet meet Financial Conduct Authority and Prudential Regulation Authority regulatory requirements and expectations. The revised plan, accepted by the regulators, seeks to address this.”
The Bank is extending Mr Booker’s contract, which was due to expire in June 2015, until 31 December 2016. His remuneration will be more closely linked to performance, which has been reported as a potential total of £5m.
Mr Booker, a former HSBC executive, was appointed after the emergence of a £1.5bn capital shortfall at the Bank in 2013. The Co-operative Group, then the main shareholder, was forced to seek a bailout from private investors, mainly hedge funds, who now own most of the Bank’s shares.
Co-operative Bank chairman Dennis Holt said: “The Co-operative Bank’s survival was in doubt when Niall joined in June 2013 and the progress we’ve made from that crisis point is in no small part due to his leadership through the turmoil. This announcement gives us a new level of certainty and the opportunity to address issues of succession in due course.”
The Bank’s strategy remains focused on reducing exposure to risk and increasing resilience. Its revised plan is designed to ensure it can withstand a severe economic stress by 2019. It was the only Bank to fail the Bank of England’s stress tests in December 2014.
Mr Booker said: “Improving the resilience of the Bank remains key to delivering our revised plan. This will be primarily achieved through the further reduction of our risk weighted assets and by improving the resilience of our IT infrastructure.
“The performance of the core bank has begun to stabilise, and we aim to build on this in 2015 by continuing to invest in our brand and developing our products, guided by our expanded ethical policy.”