The bank, which almost collapsed in 2013 with a massive hole in its balance sheet that sparked its £1.5 billion bailout by hedge funds, posted dramatically higher losses of £204.2 million, up from £77m a year earlier.
The latest red ink came after a damning report last week from Britain’s financial regulators that found the bank had kept them in the dark and misled investors when it came to the brink two years ago.
However, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) spared Co-op Bank a potential £120m fine because of the fragile state of its balance sheet.
The lender has sold risky assets and slashed branches to get its balance sheet back in shape, as it revealed yesterday that transactions fell 28 per cent in the first half after slashing its branch network to 165 from 227 a year ago.
Nearly 200 jobs have gone as a result. Niall Booker, the Co-op Bank’s chief executive, said: “We won’t be profitable in 2015 or 2016, and we are not giving guidance further forward than that.”
Despite the widened losses, Booker insisted the bank’s turnaround was on track, with the lender now in better shape to withstand any future economic headwinds.
The bank lost just 2,250 current accounts in the first six months of this year against 62,646 in the same period of 2014. It said its mortgage lending was also recovering.
“Although the core bank remains work in progress, its performance is also beginning to improve,” Booker said. “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.”
There has been City speculation that the hedge funds that pumped money into the ailing business in return for a controlling 80 per cent stake are looking at buying up the remaining 20 per cent.
But Booker said: “We have had no meaningful discussions about that.”
He added that the recent findings of the PRA, which monitors the strength of bank balance sheets, and the FCA, which protects investors, were a “reminder for all our stakeholders of the scale of the challenges we face, but how far we’ve come since June 2013”.
As well as the mammoth hole in its balance sheet, the Co-op was also engulfed by scandal after former chairman Paul Flowers, who was a Methodist minister, was filmed buying class-A drugs and later fined for possession.
The lender is rebuilding its capital base after failing a Bank of England balance sheet stress test last year. Much of the capital shortfall unearthed two years ago was linked to losses on commercial property loans stemming from its ill-starred link in 2009 with the Britannia building society.
Co-op Bank said its latest results were impacted by losses of £38.2m on sales of assets to lower its debt levels and £101.9m in costs of its turnaround.
It also earmarked another £49m to cover potential compensation claims and legal charges, such as packaged accounts and issues relating to the consumer credit act. This was up from £38.6m a year earlier.
The bank flagged the potential for a possible future merger with another challenger bank, saying it had “talked to people from time to time”.