Brexit impact may hold back Co-op bank’s recovery plans, company warns

Co-op Bank losses before tax in the first half narrowed to £177m but the bank’s chief executive warned it was facing considerable challenges

Zlata Rodionova
Thursday 18 August 2016 10:23
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The Co-operative Bank has been plunged further into debt
The Co-operative Bank has been plunged further into debt

The Co-operative Bank has warned that the economic uncertainty following the UK’s vote to leave the EU may hold back its recovery plans as the bank revealed a first half loss of £177m.

The bank pre-tax loss for the first half marks a decrease from the £204m loss delivered in the same period last year, but Niall Booker, the bank’s chief executive, warned of troubles ahead.

Booker said market conditions were “challenging” for all high street lenders in the wake of the EU referendum, with the Bank of England’s decision to cut interest to a new historic low of 0.25 per cent.

“Today’s market conditions are challenging for all retail-focused banks and the macroeconomic uncertainty following the result of the EU referendum, including the likelihood of lower for longer interest rates, may restrict our ability to grow revenue in the short term,” he said.

The Co-op Bank also warned the Brexit vote could lead to a “possible contraction” of the UK property market, affecting mortgage loan growth.

The troubled lender nearly collapsed in 2013 with a £1.5bn hole in its capital after losses due to bad property loans.

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“Addressing the bank’s historic legacy issues will continue to impact our overall financial performance until the end of our plan period. While losses have reduced year on year, the potential for headwinds in the economy as a whole presents further challenges,” Booker said.

The Co-op Bank said it would continue to post losses until the end of 2017. It confirmed that current chief executive Niall Booker will be succeed by recently appointed deputy chief executive Liam Coleman on 1 January next year.

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Almost every major bank in the City of London has dramatically reduced its forecast for growth in the UK in 2017 in the wake of Britain’s decision to leave the EU, with many effectively now forecasting recession, Treasury documents have revealed this week.

On Tuesday, Santander warned that the Brexit vote marked the end of an era of stability for the UK banking sector.

Santander issued the warning in a half-yearly trading update that came only a day after it cut the rate of interest on its popular 123 current accounts in a move that will hit more than 500,000 savers in November.

The bank’s move raised fears that other other lenders may follow suit.

“Clearly the economics no longer stacked up for Santander, but with the base rate teetering towards zero it may not be the last bank to trim its in credit current account rate,” said Andrew Hagger of Moneycomms.co.uk.

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