Co-op Bank losses deepen, but turnaround strategy on course
Co-op Bank reported a fall in annual revenues and widening losses for the year to December 31, 2019, today.
But the Manchester-based bank said the results were in line with expectations as it continues with its five-year turnaround strategy.
The bank recorded a statutory loss before tax of £152.1m, including strategic investment of £96.6m to deliver transformation, and a PPI charge of £62.5m. In 2018 the bank made a pre-tax loss of £140.7m.
It said the underlying loss of £19.7m was in line with expectations, compared with an underlying profit of £23.6m in 2018.
The bank said strong retail mortgage growth continues, with net balances up five per cent, driven by £3.8bn of new business completions and improved customer retention.
There was a six per cent growth in both franchise retail and SME deposits, while it reports a strong CET ratio of 19.6%, reduced in line with expectations.
CET, or Common Equity Tier, is the core measure of a bank’s financial strength from a regulator’s point of view.
The bank said the first phase of its turnaround plan has been completed, includinging the separation of IT systems from the Co-op Group.
It said it has re-energised its SME business, with deposit growth of six per cent, generating significant customer momentum, while it was voted ‘Most trusted mainstream bank’ by readers of Moneywise magazine and retained its position as ‘#1 Ethical bank’ (Hall & Partners).
The second phase of the transformation is under way, including a reduction in the planned level of strategic investment spend, with a focus on shifting to improving customer propositions.
Investment will centre on the brand, further enhancing the digital proposition, simplifying the mortgage and savings platforms and building the SME franchise.
The focus on cost reduction and simplification continues, primarily in areas that do not directly impact on customers.
Chief executive Andrew Bester said: “In 2019 we successfully completed the first stage of our five-year turnaround plan and our achievements have put in place a platform for growth for the years ahead.
“Our IT systems are now separated from the Co-op Group, we have a high-quality, low-risk loan book and our legacy assets are less than five per cent of our balance sheet.
“While there is still work ahead, we have significantly improved our digital proposition and reinvested in our distinctive ethical brand.
“Our underlying losses are in line with expectations and the higher statutory loss reflects our investment in transformation and the impact of higher than expected levels of PPI claims felt industry-wide.”
He added: “Our core retail and SME banking performance shows our resilience in a competitive market.
“We delivered controlled mortgage balance growth aimed at protecting margins, and saw increased retail deposits amongst our target customer base.
“Our SME business began a turnaround this year with deposit balances increasing in a competitive market.
“We believe this offers significant future growth potential and our funding award from the Banking Competition Remedies (BCR), together with investment of our own, is already helping us accelerate our plans.
“We are well positioned to extend our propositions to our retail and SME customers, and I am delighted our customer service ratings have improved and that we were recognised as Most Trusted Mainstream Bank.
“Having tackled the legacy issues of the past, we now have the foundations for the bank to grow and our brand presents real potential in a market where consumers want to drive change by seeking greener and more ethical choices.
“I am proud of what we’ve achieved and we now look to the future well positioned for the opportunities ahead.”