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The bank, which is still 30-percent owned by the Co-Operative Group, said it now expected to post an annual loss before tax and the impact of the profit generated by the 2013 Liability Management Exercise of between £1.2 billion and £1.3 billion.
Its core equity buffer is now expected to be around 7.2 percent versus the previous guidance of towards the upper end of a range of below 9 percent.
The bank said a review of its activities was continuing but the lender's objective remain unchanged, namely to restore the its capital position, focus on retail and small business customers and ditch non-core activities.
Assets are expected to have been cut by two billion pounds at the end of 2013, with staff cut by 1,000 or 14 percent.
Chief Executive Niall Booker said the review was exposing a range of issues which the lender is having to address.
"Whilst these risks were identified in the Liability Management Exercise prospectus the review means we are now quantifying the financial impact of some of those risks," Booker said in a statement.
"The result of providing for these items together with the cost of separation from the Co-operative Group is that the starting capital position of the bank for the 4-5 year recovery period is weaker than in the plan announced last year."
The bank was meant to publish its annual report on March 26 but this has now been put back to "on or before April 8" and Booker said there remain significant challenges ahead.