Co-op Bank customers rush for the exit amid ‘whirlwind of bad publicity’

The Co-operative Bank lost 38,000 customers in the first six months of this year and cut more than 1,500 jobs over the last year as it went through what its chief executive Niall Booker called a “whirlwind of negative publicity”.

This followed last year’s bailout of the bank, after the discovery of a £1.5bn black hole, by US hedge funds and bondholders and the arrest of its former chairman, Paul Flowers, who pleaded guilty to possession of drugs.

The bank yesterday revealed it lost £76m in the first half, down from the £845m it lost a year earlier.

Mr Booker said it was stronger and better governed than a year ago and ahead of target in getting rid of unwanted assets. But he admitted the bank would not make a profit this year or next and still faced big problems. “It is important to recognise we still need to ensure our capital base can meet the challenges ahead in terms of potential pension deficits, asset disposals, forthcoming stress tests and the outcome of regulatory reviews,” he said.

Co-op Bank lost 38,000 customers in the first half and gained just under 10,000, giving it a net loss of 28,000, or 2 per cent of its total current accounts. Mr Booker said this was “not significant and less than we had expected”, but he added: “The loss of any customer is a mortal wound.”

He said the rate of customers switching away had improved recently and added that the bank would launch its new ethical policy and brand in the next three months.

He refused to say how many more jobs could be lost but that there would be “one or two more” rounds of redundancies. The bank plans to close 25 branches in this half, on top of the 46 in the first half.

Mr Booker said the bank remained in regular contact with the watchdog, the Prudential Regulation Authority, which had “indicated it would be concerned if an IPO were to distract focus from the primary goal of delivering the bank’s turnaround plan and the board from providing effective oversight of, and direction to, the business”.

“It is logistically unlikely that [a float] could be executed before the end of 2014,” Mr Booker added.

He said the board was open to “any alternatives to an IPO” and was working with all stakeholders, including investors and the regulator, “to do the best thing for the bank”.

Reduced losses in the first half were partly down to a write-back of provisions that the bank had previously made on potential bad debts, which gave it a credit of £87m.

There was also a sharp fall in the costs of misconduct issues – such as payment protection insurance mis-selling and breaches of the Consumer Credit Act – from £167m to £38m. Mr Booker said efforts to claw back around £30,000 from Mr Flowers were “a matter for Co-op Group”.