The Co-operative Bank has said it remains on track to return to profit in the “near future”, as it narrowed annual losses despite setting aside nearly £22 million for loan defaults amid the pandemic.
The lender reported a pre-tax loss of £103.7 million for 2020 against losses of £152.1 million in 2019.
It booked a £21.6 million charge for expected customer defaults on loans as a result of the pandemic.
But overall losses were trimmed as its customer compensation bill fell dramatically to £2 million against the £63.5 million seen in 2019 for payment protection insurance (PPI) mis-selling.
The group said it is on track for its target to return to profit in 2021, in spite of the loan losses charge and tumbling income due to record low interest rates.
Results show net interest income fell to £266.9 million from £310 million in 2019, but the group saw a 5% rise in net mortgage lending as it benefited from the property market boom.
Recently appointed chief executive Nick Slape said: “We have met or exceeded the financial performance guidance targets we set ourselves in 2020 and our progress positions us well for a return to profitability in the near future.”
Mr Slape was promoted from chief financial officer to the top job in November, replacing Andrew Bester.
He took on the role amid a five-year overhaul at the group following a difficult period, which saw hedge funds take majority control of the lender in 2017 to save it from near-collapse.
The £700 million rescue deal saw the bank effectively sever its historic relationship with the Co-operative Group.
Under the turnaround, the Co-op Bank cut 350 jobs and closed 18 branches last year to slash costs, with aims to drive annual savings of £20 million.
Despite remaining in the red, the bank’s annual report published separately on Thursday shows Mr Bester picked up a £319,000 bonus for 2020.
His total pay for the year until his departure at the end of October was £1.56 million and he continues to be paid a basic salary for the remainder of his notice period ending in July.
Mr Slape was awarded a £135,000 bonus for 2020, while the bank shared £4.2 million in bonuses among its 2,827 staff last year.
This is down from a £7 million bonus pool for 2019.
The results also show the bank has lent £286 million to small businesses through two of the Government’s Covid-19 support schemes – Bounce Back Loans and the Coronavirus Business Interruption Loan Scheme.
It cautioned that borrower defaults under the schemes are an “operational risk” to the group and the number of small business customers who took the support and may struggle to repay is “under close review”.