Pandemic outbreak adds £12m to bank’s first quarter losses

Losses narrowed slightly for Manchester-based Co-op Bank, it revealed in its first quarter update today, despite the impact of coronavirus measures.

The bank reported a 20% fall in operating income in the three months to March 31, from £94.8m in 2019, to £75.8m. Statutory pre-tax losses of £27m compared with a £28.6m loss the previous year.

Co-op Bank said that, despite the impacts of COVID-19, underlying performance for the first quarter of 2020 has been in line with expectations in the context of a challenging UK lending market.

Towards the end of the first quarter the impact of COVID-19 emerged and negatively affected the statutory loss before tax by around £12m.

As part of its response to COVID-19, the bank said it was the first to issue £500 authorised overdrafts automatically, interest free, for more than 350,000 customers with authorised overdrafts.

Almost 15,000 mortgage payment holidays requests had been received 30 April 30, while almost 2,000 payment holiday requests for loans and credit cards were received by the same date.

It says it has a high-quality, low-risk asset book with a low cost of risk following sustained and comprehensive de-risking

COVID-19-related impacts are anticipated to negatively affect operating income and credit impairment expectations. However, the group said it is taking decisive action to reduce both operating expenses and investment spend to mitigate the risks in 2020

It said the future impacts remain uncertain at this point, and a more comprehensive update will be provided in the interim results.

Chief executive Andrew Bester said, “As the UK navigates this extraordinary and unprecedented crisis, banks have a critical role to play in keeping the economy moving and I am proud and grateful for the work of all colleagues in providing the financial support our personal and small business customers need.

“All of our branches and contact centres have adapted and are open to serve customers safely throughout this period and we are providing payment holidays for approximately 17,000 mortgage, loans and credit card customers to date, and additional overdraft facilities for over 350,000 current account customers.

“Since our accreditation for the Coronavirus Business Interruption Loan Scheme, we have worked tirelessly to make these facilities available.

“This is now live for our SME customers and we have started to process customers’ applications. We are now working to be able to offer Bounce Back Loans as soon as possible.

“There is much more to do, but we are committed to helping individuals and small businesses through the financial strain they are facing, and we hope we can make a difference to helping drive economic and social recovery in the months ahead.”

He added: “Becoming a true SME challenger at a time when businesses need it remains a priority for us, and we are building momentum.

“Customers are trusting us with more of their deposits, which are up 11% year-on-year, and since the start of the crisis that growth has nearly doubled.

“Our SME banking transformation is on track, fuelled by our BCR funding alongside investment of our own, and we are attracting 16% of Incentivised Switching Scheme customers against our target of six per cent.

“Retail deposits from our core savings customer base have also increased, and our current account customer satisfaction levels are the highest they have been since 2013 with an NPS rating of +30.

“As we look forward, clearly the year ahead will be challenging and, like others, we will need to reprioritise investment spend, given expected pressure on income in a low base rate environment.

“We have examined the potential impact of the crisis on the bank and are satisfied we are in a position of resilience.

“The progress made in our transformation programme, including de-risking the bank and the significant investment in IT systems, means we face into this new economic environment with a strong CET1 ratio, a low-risk mortgage book, improved digital propositions and our distinctive ethical brand.

“Taking care of our loyal customers throughout this unprecedented and uncertain period is our foremost priority, and the significant headway we have made in transforming the bank puts us in a good position to do so.”