The Co-operative Bank admitted yesterday there remained “much to do” as it unveiled narrowed losses but warned of more looming redundancies and branch closures.
Pre-tax losses in 2014 fell to £264.2 million from £632.8m the previous year, as chief executive Niall Booker said he expected the bank to remain in the red for at least two more years.
“The Co-operative Bank is stronger than a year ago and we end the year with a strengthened capital position, ahead of schedule in the reduction of non-core assets and having made progress reducing underlying costs and improving the day-to-day management and governance,” Booker said.
“However, we are in the early stages of the turnaround and there is still much to do to transform the organisation into a sustainable business.”
He added that although the bank was stabilising “it is not yet fully docked in the safe harbour”.
The lender revealed it was to close a further 57 branches in 2015 after 72 were shut last year.
The bank’s headcount was cut by 993 to 5,711 last year, and Booker said further redundancies were “inevitable” as the costbase needed further cuts.
However, his own future was secured as the Co-op Bank said he had signed a new contract keeping him in situ until the end of 2016, increasing his maximum possible pay package to £4.97m for this year based on what it called “stretching” performance targets.
The chief executive was paid £3.1m for 2014 out of a possible £4.3m, while in 2016 the maximum will be £4.5m.
Last year Co-op Bank failed a Bank of England stress test on the strength of its capital cushions in the event of a severe economic downturn.
As a result, it must now run down its loanbook by £5.5 billion by 2018 to strengthen its balance sheet. The bank said its latest results were boosted by lower costs as well as a fall in “conduct and legal related charges”.
These charges, including compensation for mis-selling payment protection insurance (PPI), fell to £101.2m last year from £411.5m in 2013.
Yesterday’s accounts also showed that the group’s assets now considered non-core in the shake-up fell last year to £10.3bn from £12.5bn.
One banking analyst commented: “It is a better performance from Co-op Bank, but just one staging post on what will be quite a long journey back to financial and reputational health for the business. The chief executive was totally right to suggest there is no quick fix.”
The self-styled “ethical” bank nearly collapsed two years ago after a £1.5bn shortfall was discovered in its balance sheet, scuppering an agreed takeover bid for more than 600 Llloyds Banking Group branches. That episode dragged the wider mutually owned Co-operative Group parent to a £2.5bn loss in 2013.
Co-op Bank had to be rescued in a deal which saw the parent’s ownership of the bank shrink to 20 per cent as it ceded majority ownership to bondholders, including US hedge funds.
There was further damage to the bank’s reputation after a sex and drugs scandal involving its former chairman, the Reverend Paul Flowers, the so-called “Crystal Methodist”.
It led to robust attacks by MPs on the Treasury select committee about how Flowers could have been appointed to the role in the first place despite a marked lack of banking experience.
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