Co-operative Bank reports first-half loss of £204m

Emma Dunkley
Christopher Furlong | Getty Images

The Co-operative Bank suffered a near trebling of losses in the first half of the year amid a major restructuring and a battle with legacy issues it admits will weigh on performance "for some time".

The UK lender posted a pre-tax loss of £204.2 million ($319 million) for the first half, nearly three times more than the £77 million loss delivered in the same period last year.

The bank said on Thursday that the net loss was due to asset sales, reduced income as it radically shrinks its balance sheet and an increase in project costs.

The results come a week after the bank escaped a £120 million fine for management failings in the years leading up to its near-collapse in 2013.

The Prudential Regulation Authority said last week the bank had "a culture which encouraged prioritising the short-term financial position of the firm at the cost of taking prudent and sustainable actions for the longer-term".

Niall Booker, chief executive of the Co-op Bank, said: "Over the first half of 2015 we have continued to make real progress delivering our turnround plan focusing on reducing our risk-weighted assets to increase our ability to withstand economic stress, on making our IT platform more robust and reshaping the bank around our individual and small business customers.

"Of course, we have always said that addressing legacy issues will continue to dominate financial performance for some time and there is considerable work ahead towards a full recovery."

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However, he added: "Our results are slightly better than our plan suggested."

The bank was forced to increase its provision for conduct and legal charges by £49 million, up from £38.6 million in the first half of last year.

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The results follow a torrid period for the Co-op Bank, after it was bailed out twice by investors, including a group of hedge funds, after uncovering a £1.5 billion capital shortfall two years ago.

The UK lender was also hit with a storm of negative publicity in 2014 after former chairman Paul Flowers was fined for possessing illegal drugs.

It came under pressure again at the end of last year after it emerged as the only UK lender to fail the regulator's key test of capital strength, prompting a plan to almost halve its balance sheet. The bank warned at the time it would probably remain unprofitable for the next three years.

The bank is still in the process of bolstering its capital, increasing it to 14.9 per cent by the end of June, up from 13 per cent at the end of last year.

It recently completed a £1.5 billion securitisation of part of a residential mortgage portfolio and has raised £250 million of tier two capital. The bank issued £250 million of subordinated debt in July in another move to strengthen its position.

Total operating costs fell to £259.6 million in the first half compared with £297 million in the same period last year. Project costs increased to £101.9 million, up from £68.8 million in the same period last year, as the bank revamped systems and processes.

Mr Booker said earlier this year that Co-op Bank is likely to merge with another bank after suffering its third consecutive year of heavy losses. It reported a pre-tax loss of £264 million last year, shrinking by nearly a half from the £633 milliion loss posted in 2013.

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