Co-op Bank Reports Six-Month Loss Of £204m

The Co-operative Bank has reported a statutory pre-tax loss of £204.2m, following an increase in legal expenses and a drop in income.

The bank faced crisis in 2013 as it was revealed it had a £1.5bn hole in its finances, forcing bondholders to take control of the business to avoid collapse.

Although the bank has embarked on an ambitious project to "de-risk" itself, it was still the only bank to fail a stress test by the financial regulator last year and continues to face challenges stemming from its previous difficulties.

Just last week it avoided a £120m fine from the Financial Conduct Authority (FCA) over the mismanagement involved in the 2013 crisis, as the regulator accepted that punishing the business would only hinder its efforts to recover.

One notable aspect of the plan to turn the bank around has involved encouraging customers to manage their accounts digitally, which has led to a 28% drop in the volume of transactions being dealt with by branches.

This has allowed Co-op bank to reduce the number of branches they are running by 26% in the first half of this year - from 227 to 165 - and cut staffing levels accordingly, leading to a drop in operational costs.

The bank has admitted that branches will continue to close in the coming years to reflect the changing nature of the way customers use their services.

It (Other OTC: ITGL - news) has also been revealed that the Co-op Bank has entered into a contract with outsourcing company Capita (LSE: CPI.L - news) , who will manage the processing of mortgages for the bank.

Although this could take some of the stress and risk away from the Co-op in the long term, the bank does admit that it could prove challenging to manage in the more immediate future and may result in disruption for its mortgaging business.

Chief executive Niall Booker said the focus was still on moving forward and emphasised the progress which had already been made.

He 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.

"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."