THE CO-OPERATIVE Bank lost 38,000 current account holders in the first six months of 2014 amid what the chief executive branded a “hurricane of negative publicity” following the group’s near-collapse last year.
News of the fall came as Co-op Bank disclosed narrowed losses of £75.8 million compared to £844.6m in the same period last year, but repeated a full-year profit was unlikely this year or in 2015.
Chief executive Niall Booker also played down an early flotation of the bank, which is now majority owned by bondholders including US hedge funds following its spate of problems.
He said the Prudential Regulation Authority (PRA) had “indicated it would be concerned if an IPO [initial public offering] were to distract focus from the primary goal of delivering the bank’s turnaround plan”.
The bank lost a net 28,199 current account customers in the first half, with the departure of about 38,000 offset by 9,700 new customers. The net loss amounted to 2 per cent of the total.
“Considering the amount of time that we spent receiving negative publicity during the first and second quarters, I think the reduction is not significant and probably less than we would have expected,” Booker said.
“The loss of any customer is a mortal wound. I don’t think it is a bad outcome but I certainly don’t want to appear complacent about it.”
He said the loyalty of customers who had stuck with the bank through the bad times was “deeply appreciated”, and reiterated the bank’s commitment to ethical values. The wider Co-operative Group plunged £2.5 billion into the red in 2013, when a £1.5bn hole in the banking arm’s balance sheet sank its bid for more than 630 Lloyds branches and triggered regulatory investigations and parliamentary hearings.
A scathing independent report by former Treasury official Sir Christopher Kelly blamed the Co-op Bank’s problems on a “sorry story” of multiple management failures.
The disastrous period saw it having to be rescued in a deal which saw the wider Co-op Group’s stake in the lender shrink to 20 per cent, from 100 per cent.
Kelly’s report painted a picture of the Co-op Bank’s culture in which an “acceptance of mediocrity” took hold. It had noted that Methodist minister Paul Flowers had been appointed chairman in 2010 despite being “an individual who manifestly did not have the appropriate experience”.
Flowers left last year and was later caught up in a drugs scandal. Despite the problems, Booker said yesterday that the bank was stronger and better governed than a year ago, and ahead of target on divesting non-core assets.
On likely losses in 2015 as well as this year, Booker added: “It is important to recognise we still need to ensure our capital base can meet the challenges ahead in terms of potential pension deficits, asset disposals, forthcoming stress tests and the outcome of regulatory reviews.”
The Financial Conduct Authority is working on its report into the near-collapse of Co-op Bank. The latest results also saw a sharp fall in the cost of misconduct issues – like payment protection insurance mis-selling and breaches of the Consumer Credit Act – to £38.6m from £163m.