Co-op comeback: Bank makes first profit since 'Crystal Methodist' sins
The Co-op bank turned its first profit for five years on Tuesday, offering hope that it has recovered from an extraordinary period that saw its chairman filmed buying crystal meth and the bank fall into the hands of Wall Street hedge funds.
Under new chief executive Andrew Bester, a former Lloyds Banking Group boss who arrived in July, the bank made £14.3 million in the third quarter.
That’s a near-£40 million improvement on the loss made for the same period a year ago.
In 2016, the worst year in its long history, the bank plunged to a loss of £477 million, taking the total losses then to £2.6 billion.
The losses stemmed from the disastrous takeover of Britannia building society, a deal that forced the bank to put itself up for sale. The wider Co-op Group wasn’t keen to come to its rescue and has seen its stake all but disappear. Around 4000 jobs have gone and 200 branches shut.
Today Bester sounded an upbeat note, noting that three million customers remained loyal to the bank, which sells itself as an “ethical” player.
“We have a very rich brand that continues to resonate with our customers,” he said. “I think of us as a challenger bank, but one with a long history.”
Co-op bank ran into financial trouble in 2013, a picture not helped when then chairman Paul Flowers pleaded guilty to possession of cocaine, crystal meth and ketamine, earning the church minister the nickname “Crystal Methodist”. He has been banned from banking, but only suspended from the church.
Co-op bank said today it would complete an IT separation from the Co-op Group, but insisted there would be no repeat of the chaos when TSB did the same from Lloyds Banking Group, since the shift is already well under way. Thousands of TSB customers were locked out of their accounts after the migration.
Bester said the “transformation” of Co-op bank would take three to five years.
He praised the “extraordinary commitment of our colleagues” and said he would “fully restore our leading position as an ethical bank”.
The rescue deal from the hedge funds leaves it with a solvency buffer of 22.7%, a good sign of financial strength.
Like rivals, it noted the intense competition in the mortgage market, which has seen margins hit.
It still expects to do more this year than the £3.2 billion of mortgage business it reported in 2017. The bank is far from out of trouble. Over the first nine months of the year, as opposed to the last quarter, it made yet another loss of £87 million.
