Co-operative Bank quarterly report shows reduction in underlying losses

The Bank attributed the loss to a “challenging UK lending market” and the Covid-19 pandemic

The Co-operative Bank reported a loss for the first quarter of 2020 which, it said, was influenced by a £12m hit from coronavirus.

The Bank made a statutory loss after tax of £15.8 in the first three months of the year, down from £29m for the first quarter of 2019. Its operating income for the same period was £75.8m, down 20% from £94.8m in the first quarter of 2019 (1Q).

It said it would work to reduce operating expenses and investment spending to mitigate the risks in 2020. Underlying performance for the first quarter of 2020 had been in line with expectations in the context of a “challenging UK lending market” and the Covid-19 pandemic striking, it added.

According to the Bank, the Covid-19 crisis has negatively affected the statutory loss before tax by around £12m. Yet its CET1 capital ratio remains strong at 18.3%, in surplus to the regulatory minimum of 10.9%, while its total capital ratio for Q1 was 22.6%.

Chief executive Andrew Bester thinks the Bank has “a critical role to play” in keeping the economy moving.

He said: “All of our branches and contact centres have adapted and are open to serve customers safely throughout this period and we are providing payment holidays for approximately 17,000 mortgage, loans and credit card customers to date, and additional overdraft facilities for over 350,000 current account customers. Since our accreditation for the Coronavirus Business Interruption Loan Scheme, we have worked tirelessly to make these facilities available. This is now live for our SME customers and we have started to process customers’ applications. We are now working to be able to offer Bounce Back Loans as soon as possible.

“There is much more to do, but we are committed to helping individuals and small businesses through the financial strain they are facing, and we hope we can make a difference to helping drive economic and social recovery in the months ahead.”

Over the past couple of years, the Co-operative Bank has been working to grow its presence in the SME banking market. Becoming a “true SME challenger” remains a priority, said Mr Bester. SME deposits have grown by 3% compared with 4Q 2019, and by 11% compared with 1Q 2019.

“Customers are trusting us with more of their deposits, which are up 11% year-on-year, and since the start of the crisis that growth has nearly doubled. Our SME banking transformation is on track, fuelled by our Banking Competition Remedies funding alongside investment of our own, and we are attracting 16% of Incentivised Switching Scheme customers against our target of 6%. Retail deposits from our core savings customer base have also increased, and our current account customer satisfaction levels are the highest they have been since 2013 with a Net Promoter Score rating of +30.”

In terms of the future, the bank expects 2020 to be a “challenging year”, in which it will be responding to expected pressure on income in a low base rate environment by reprioritising investment spent.

“We have examined the potential impact of the crisis on the Bank and are satisfied we are in a position of resilience. The progress made in our transformation programme, including de-risking the Bank and the significant investment in IT systems, means we face into this new economic environment with a strong CET1 capital ratio, a low-risk mortgage book, improved digital propositions and our distinctive ethical brand. Taking care of our loyal customers throughout this unprecedented and uncertain period is our foremost priority, and the significant headway we have made in transforming the Bank puts us in a good position to do so,” added Mr Bester.

In February the Co-operative Bank reported an underlying loss of £19.7m for the year to 31 December 2019.

Related: Co-operative Bank reports operating profit of £14.7m

Previously owned by the Co-op Group, the Co-operative Bank has been a separate business since 2017 but retains links to the co-op movement via its involvement in the Hive, an advice and support programme run by Co-operatives UK.

Bank customers are also represented by a Customer Union, a co-operative formed to ensure that the Co-operative Bank maintains a customer-led ethical policy while working to ensure an eventual return of the bank to full co-operative ownership.