The Co-operative Bank managed to dramatically reduce its losses in 2014 despite paying out compensation for payment protection insurance mis-selling, investing in its IT infrastructure and repairing the £1.5 billion ($US2.2 billion) capital black hole in its balance sheet.
The embattled bank confirmed in its results statement for the full year ending December 31, 2014, that its statutory loss before tax hit £264.2 million, which is self-proclaimed “considerably better” than the £632.8 million it lost in 2013.
Other highlights include:
- Operating loss: £55.3 million in 2014 compared with £662 million in 2013.
- Total operating costs: £594.6 million for 2014 compared with £655.9 million in 2013.
- Total conduct and legal related charges, including PPI: £101.2 million, compared with £411.5 million in 2013.
- It closed 72 branches in 2014 and plans to close another 57 this year to reduce costs.
“Over the course of 2014 the management team has continued to take significant steps to implement the strategy and to turn the Bank around,” said Niall Booker, CEO at the Co-op Bank in a statement. “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.
“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. There are a number of matters where the Bank does not yet meet Financial Conduct Authority and Prudential Regulation Authority regulatory requirements and expectations. The revised plan, accepted by the regulators, seeks to address this.”
In May 2013, the Co-op Bank shocked the markets after it reported a £1.5 billion capital black hole. The revelation forced the Co-Operative group, until that moment the main shareholder, to seek a bailout from private investors.
In its 2014 results, the Co-op Bank said it has now made a significant improvement due to reduced impairments partially offset by reduced income from lower assets and high project costs.
It said that the capital position of the bank has strengthened.
“Improving the resilience of the Bank remains key to delivering our revised plan. This will be primarily achieved through the further reduction of our Risk Weighted Assets and by improving the resilience of our IT infrastructure,” said Booker.
“These actions will continue to build a stronger and better business for all our stakeholders and are critical to providing the platform to focus on what matters to our customers. The performance of the Core Bank has begun to stabilise, and we aim to build on this in 2015 by continuing to invest in our brand and developing our products guided by our expanded Ethical Policy.
“We have always been clear that the journey to reshape the business would take time but I am confident that our approach to banking is as relevant in today’s world as it ever was, and that we remain the bank of choice for anyone who shares the values and ethics which lie at the heart of our business.”
But the Co-op Bank is clearly happy with Booker’s performance in turning around the lender after it announced that it is retaining him until December 31, 2016, after agreeing to renew his contract past June 2015.