Promising uptake of Co-operative Bank loans by SMEs
The Co-operative Bank has posted half year pre-tax profits to the end of June 2024 of £24.2m, a drop from £61.8m in the corresponding period last year.
The group’s total income for the first half of the year was £229.5m, a drop from £245.1m.
But in a statement to markets this morning the Manchester-headquartered bank said it has enjoyed a “promising uptake” in lending from small and medium sized businesses and was ready to return to a mutual structure with its acquisition by the Coventry Building Society, due to complete in September.
Enhancements to the service offered to SMEs has resulted in an increase in Business Current Account applications from 7.1k in 1H 23 to 9.5k year to date. A newly launched fixed rate loan product for SME lending has grown too, which the bank says reflects a commitment to the growth pillars targeted in our refreshed strategic focus.
But profits were partly dented by total underlying cost increases of 6% to £205.4m (1H 23: £194.0m), driven by the impact of annual salary increases, higher levels of customer fraud remediation, which have risen to £12.5m (1H 23: £5.9m), alongside inflationary pressures and the Bank of England (BoE) levy of £1.1m.
The bank has also spent £8.6m on “transaction related costs” incurred to date on the sale to the Coventry Building Society, but has not included bonuses and advisor related costs that are contingent on the deal completing.
The deal is expected to be completed in the first quarter of 2025, with integration taking place gradually over several years.
Nick Slape
Nick Slape, Chief Executive Officer, said: “In May, we announced the signing of the sale and purchase agreement with Coventry Building Society. This will mark a return to mutualisation and follows the delivery of the strategy set in 2019 to turnaround the Bank by de-risking and simplifying, returning to profitability and delivering a liquidity event for shareholders.”
Slape also noted that the Bank has received an investment grade credit rating from Moody’s of Baa3, reflecting the achievement of sustainable profitability underpinned by a strong liquidity and capital base.
“This has all been delivered whilst building on our core franchise. Mortgage new business applications in the first six months of the year were more than double those in the same period last year, as were new retail savings account openings, and at the same time new personal current account openings showed a c.50% increase. Our resilient liabilities and healthy liquidity have also enabled us to continue with the prepayment of our TFSME funding, with £1.7bn now repaid.”
