Strong interim performance from Co-op Bank
Co-op Bank, the Manchester-based ethical finance group, delivered a “strong” financial performance, it said today (July 28).
While the interim results may please shareholders, customers were fuming yesterday after a “payment processing system issue” left many of the bank’s 3.1 million customers failing to receive wages, benefits and other payments due to the technical issue, leading to the bank having to offer compensation for those affected.
However, on a corporate level today, chief executive Nick Slape was able to deliver some better news.
In the six months to June 30, 2023, the bank achieved a total income of £266.5m, up from £229.6m, although pre-tax profits were static at £61.8m.
Net interest income increased by 18% to £245.1m, compared with £208.2m the previous year, and net interest margin (NIM) rose by 33 basis points (bps) from 151bps to 184bps, with both benefitting from increases in the base rate.
There was a net impairment charge of £300,000, against a £2.8m credit this time last year, driven by an increased provision for macroeconomic factors.
But the bank said it has a surplus liquidity position, strong asset quality and significant headroom to capital requirements.
Nick Slape said: “In the first half of 2023, we have delivered a strong financial performance with a statutory profit before tax of £61.8m and a statutory return on tangible equity of 13.0%.
“We have made good progress on our mortgage and savings transformation programme having launched a third new savings product, completed the insourcing of Capita colleagues and migrated c.60% of our existing savings accounts.
“Our low risk balance sheet and strong capital and liquidity positions provide a resilient foundation from which to focus on our customer-driven goals in an uncertain macro-economic environment.”
He added: “I am pleased to see the investment in our customer proposition being validated and, looking to the future, I am excited by the opportunity to leverage our technology re-platforming to the benefit of both customers and colleagues alike.
“We recognise the financial challenges that the current economic uncertainty and the cost of living crisis poses for a number of our customers and colleagues and we will continue to support them. We are proud to have signed up to the recent ‘Mortgage Charter’ offering tailored help to those customers who need it.”
Looking forward to the remainder of the financial year, the bank predicts a net interest margin of approximately 180bps, reflecting additional base rate rises offset by mortgage margin pressure.
It anticipates total statutory costs of approximately £420m, comprising further investment in its brand and systems alongside inflationary pressures.
Arrears are expected to remain low and stable across all portfolios.
It says its new capital management framework, including dividend policy, will enable a more efficient level of capital resources and allow the bank to make the required investment in the business to grow and provide capital returns to shareholders over the long term.
