The Co-operative Bank today made it starkly clear just why regulators backed off fining it £120 million last week for the string of failings which led to its £1.5 billion bailout by hedge funds.
The bank, which almost went to the brink in 2013 with a massive black hole in its balance sheet, saw pre-tax losses treble in the first half of the year from £77 million to £204 million as its new management strives to turn it around.
Last week the Co-op was censured by the Financial Conduct Authority and Prudential Regulation Authority, but both bodies said they would not impose a substantial fine because this would damage the business.
Co-op Bank’s chief executive, Niall Booker, admitted: “We won’t be profitable in 2015 or 2016 and we are not giving guidance any further forward than that.”
Part of the increased, first-half loss was due to the bank raising the amount it is spending on putting things right to £101 million, along with losses on the sale of unwanted assets.
But Booker said the result was actually slightly better than management had expected and added that the flight of customers which started in 2013 seemed to be coming to an end. The Co-op lost just 2250 current accounts in the first half against 62,646 which disappeared in the same period last year.
He refused to be drawn on what might happen to the bank’s future ownership. There have been suggestions that the hedge funds which pumped money into it twice in return for an 80% equity are looking at buying up the Co-operative Group’s remaining 20% holding.
But Booker said: “We have had no meaningful discussions about that.”
And although he remains convinced that Co-op Bank will be part of the consolidation of some of the country’s smaller banks, he would only add: “We talk to people from time to time but that is all we will say at this point.”
He said that the alternative of a stock-market flotation of the bank remains “an option but it will be a bit of time before we are ready for that”.
Having halved the number of its branches since 2013 down to 165 and axed thousands of staff the Co-op Bank has a much lower cost base.
The bank has also seen a positive reaction to its recent advertising campaign which emphasises it ethical stance.
The Co-op boss said: “Although the core bank remains a work in progress, its performance is already beginning to improve.”Reuse content