Co-op Bank tripled its net loss -- and it looks like the pain is going to continue

The Co-operative Bank just revealed it made a hefty net loss as the group continues to struggle with repairing itself from its near-collapse two years ago.

For the six months ending June 30, pre-tax losses tripled year-on-year with £204.2 million ($US320 million) for the period, compared with losses of £77 million ($US121 million) a year earlier.

The bank said the loss was “better than management targets.” However, follows on from last year’s depressing results. In 2014,
its statutory loss before tax hit £264.2 million ($US414 million), which is “considerably better” than the £632.8 million it lost in 2013, said the bank at the time.

In a lengthy statement in the bank’s interim financial results for the period, Co-op Bank CEO Niall Booker warned that it will be a long time until the institution will seen as healthy again (emphasis ours):

“Over the first half of 2015 we have continued to make real progress delivering our turnaround plan focusing on reducing our risk weighted assets to increase our ability to withstand economic stress, on making our IT platform more robust and reshaping the Bank around our individual and small business customers.Our work to
improve resilience and reduce costs is on course. In addition, although the Core bank remains work in progress, its performance is also beginning to improve as we increase efficiency, continue to re-invest in the brand and work with customers to offer competitive products that meet their needs. 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.

“Moving forward, we need to stay focused on meeting threshold conditions and continuing to make the Bank more resilient. We must also focus on keeping our products simple; continuing to reinforce risk management and systems; strengthening our culture and maintaining our high levels of service.

“The transformation of the Bank remains challenging, however, this should not diminish the progress made against our strategic plan. The actions we are taking are creating a resilient bank that can stand alone, distinguished in the marketplace by its values and ethics. This is fundamental to driving value over time for all our stakeholders – customers, colleagues, shareholders and the communities we serve.”

The Co-op Bank is still trying to recover from its near-collapse two years ago when it revealed a £1.5 billion ($US2.3 billion) black hole in its balance sheet. It was bailed out by bondholders in 2013.

The BoE’s Prudential Regulation Unit, the banking watchdog, along with a team at the Financial Conduct Authority, is still pursuing key individuals wrapped up in the bank’s downfall. It’s currently dealing with hefty legal costs.

However, the PRA wanted to hand Co-op a huge £120 million ($US187 million) fine for getting into the mess, but the bank is too broke and weak to pay it.

One of the most critical areas for the Co-op Bank to improve is its capital requirements — an amount of cash that a bank is required to hold, in order to create a buffer zone to help it in a time of huge market turmoil and a possible financial crisis.

Capital strength improved to 14.9% from 13% at the end of last year.

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