Future of Co-operative Bank is virtually assured

Co-operative Bank, which prides itself on its ethical stance, will close its branches by the end of the century and replace them with booths in which customers will talk to staff through a video-link.

By the end of this year, the bank will have closed 10 per cent of its branches. "It's part of our cost savings, moving from the old way of banking to the new," said Terry Thomas, managing director.

The bank, wholly owned by the Co-operative Wholesale Society, yesterday said its interim profits were a record pounds 25.1m, up 24 per cent. Mr Thomas believed the closure of 100 or so branches would not lead to redundancies because the staff would be deployed in the bank's expanding telephone banking sector.

A few staff will be needed for the video-links and to visit the new "tardis"-like outlets, of which there are likely to be around 100.

The move to cut costs is part of the Co-op Bank's aim to slash its ratio of costs to income, which at 75 per cent is much higher than other institutions in its sector.

Most other banks are exploring ways to cut costs through branch closures but the Co-op's plans go one stage further.

All of its 2 million retail customers are given access to telephone banking, and Mr Thomas said the bank was increasing telephone access for its corporate clients.

He became managing director in 1988, at a time when many banks were beginning to face up to the reality of mounting bad debts. His answer was to "go back to basics", pulling out of mortgage lending and concentrating on selling an ethical approach to banking.

Yesterday the bank launched a national poster campaign to hammer home the message that it takes this approach seriously.

Mr Thomas said the bank recently refused a potentially lucrative account from a big unnamed water company because it was one of the sector's worst polluters.