Recovery blow for Co-op Bank as its losses skyrocket

The troubled lender said its annual pre-tax losses have more than doubled to �610.6 million. Picture: PA
The troubled lender said its annual pre-tax losses have more than doubled to �610.6 million. Picture: PA
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Losses at the troubled Co-operative Bank leapt more than 130 per cent to £610.6 million in 2015, as its boss gave warning yesterday that the business would remain in the red for another two years.

It came as it emerged that the self-styled “ethical bank” has boosted chief executive Niall Booker’s pay package by a quarter.

Co-op Bank’s latest losses followed a deficit of £264.2m in 2014, as the lender said it continued to suffer from “the issues of the past” and was haemorrhaging customers amid a broader backcloth of volatile financial markets and historically low interest rates.

The bank also said it lost 300,000 retail customers in the year to December 31, mostly ex-Britannia building society savers. It now has 4.1 million customers.

It came as Co-op Bank’s annual accounts showed that Booker, who is leading the attempted turnaround of the lender, saw his pay jump 25 per cent in the period to £3.85m, as long-term incentive awards were activated.

The bank said its losses stem from the previous management in place when it nearly collapsed in 2013 after a £1.5 billion hole was unearthed in its balance sheet.

Booker said: “We can see that at the total bank level (as opposed to the new ‘core’ bank) it is unlikely we will be profitable in 2017.”

Since he joined Co-op Bank almost three years ago it has sold off risky assets and slashed branches to try and streamline and refocus the business.

Booker said that he had enjoyed the early challenge of trying to reposition the bank, but he gave no indication he would stay on beyond the end of this year when his current contract expires.

“You don’t get trauma surgeons who treat you forever,” he said.

The bank said last year it cut operating costs by 13.5 per cent to £492m, as it closed 58 branches and reduced full-time staff by 18.5 per cent to just under 4,500. It plans to close a further 54 branches this year.

The lender said losses at its core bank, the parts of the business not affected by the discovery of the balance sheet deficit that eventually led to bondholders taking majority control of the bank, narrowed to £14.9m last year from £78.6m in 2014.

Booker said Co-op Bank had been “successful in improving capital resilience, reducing costs and strengthening the performance of the core bank.”

He added: “Whilst the bank as a whole will report a loss before tax in 2016 and 2017, we expect a return to operating profitability in the core bank before the end of 2017.”

In December 2014 the Co-op Bank failed a Bank of England stress test – a key measure of capital strength – which assesses the ability of major UK lenders to withstand another financial crisis.

Booker said since then the bank had cut its non-core assets by half and raised £250m of capital to bolster its balance sheet.