Co-op Bank’s profit rises fourfold as boss boasts rate rises for all savers

The boss of Co-operative Bank has said it has benefited from being more “nimble” than the UK’s big five banks as it reported soaring profits on the back of higher interest rates.

Nick Slape, the group’s chief executive, said the challenger bank passes back about 60% of every interest rate rise to all of its savings customers.

It came as Co-op Bank – which is no longer part of the wider Co-operative Group – revealed its pre-tax profit jumped more than fourfold in 2022 to £132.6 million, from £31.1 million in 2021.

This marked its second full year of profitability, after the once-flailing bank was rescued by a group of hedge funds in 2017.

Mr Slape told the PA news agency: “The big five banks have got huge amounts of liquidity because of their market share. I am at the whim of the HSBCs and the Lloydses – if they wanted to write mortgages at really tight margins then they could do that. They need to feed their machines.

“It is something we have always had to contend with. But we can actually be a lot more nimble, we can nip and tuck. We can pull certain products if we need to, if it’s not competitive.”

He went on: “What I have seen is that some of the bigger players have passed on interest rates to savers but only on products that are open at the moment to customers, not to those that can no longer be opened.

“What we have done is we have passed on rate rises to both on-sale and closed book products, so to all our customers, because we think that’s the right thing to do.”

He stressed that it is better to keep savers loyal than to have to “win them back” if they are finding better rates elsewhere.

For example, the bank has a one-year fixed-term savings account with 3.46% annual return rate, and an instant access saver with a 1.5% return rate – with its savings rates set to rise again from Wednesday.

It follows the Bank of England hiking up interest rates to 4% earlier this month, the 10th consecutive rate increase in just over a year.

Co-op Bank, like other lenders, has benefited from increasing borrowing costs in line with the rising base rate.

The bank’s net interest income hit £458.3 million in 2022, up by 41% from £323.9 million a year earlier, as it took in greater earnings from the average loan.

Nevertheless, it set aside a net impairment charge of £6.4 million over the year to cover expected credit losses.

The charge reflects a deterioration in economic forecasts and adjustments for affordability across its loan book as a result of cost of living pressures, the bank said.

Mr Slape said the bank is anticipating that house prices will fall by around 6% this year which could lead to a slowdown in mortgage lending.

He said: “There will be a lot of people still needing to switch because they have come to the end of their fixed-rate product.

“Customers are thinking about that rate shock, and leaving it pretty much until the last minute before they make the decision about what to go for because there has been a lot of volatility in terms of headline mortgage pricing.

“So we think a lot of the focus is going to be on the retention of customers, and customers switching as opposed to necessarily buying properties, which is why we think house prices will probably fall.”

Co-op Bank is reportedly eyeing up a bid to buy Sainsbury’s Bank’s £650 million loan portfolio.

Mr Slape told PA there is “nothing on the cards” in terms of acquisitions.

But he said: “If the price is right and we think it is a good fit, then we will explore it.”