The Co-Op Bank’s finances have gone from black hole to lingering grey smudge. After finding a shortfall of up to £1.5bn in its accounts in 2013 (whoops), it made a loss of £284m in 2014, which then grew 114% to £610m in 2015. There are signs of green shoots, however.
Chief executive Niall Booker has been working hard on ‘triage’ for the bank’s new hedge fund owners, selling off risky assets (including over half of its high risk Optimum mortgages) in order to boost its capital buffer so it won’t fail the Bank of England’s stress tests (again).
Along with increased provisions for PPI mis-selling charges, which more than doubled to £193.7m, this is the reason for the loss. In operational terms, the bank’s losses have in fact narrowed from £79m in 2014 to £15m last year, and Booker expects it to be in profit by the end of 2017.
Making the Co-Op Bank safe and solvent is clearly the most important task if it’s to have a future. But in an era of increasing competition on the high street and persistently low interest rates, its recovery will also depend on getting its good name back.
It’s been trying to restore its ethical credentials with such moral acts as blacklisting payday lenders, and it seems to be working. The painful decline in current account holders all but halted last year, with the number of prime account holders actually increasing marginally to 656,000. Perhaps consumers are finally putting the whole Paul ‘Crystal Methodist’ Flowers scandal behind them. It's hard, however, to see them embracing the ethical bank wholeheartedly when it's 80% owned by hedge fund managers. Sadly, there’s not much Booker or his successor (his contract is due to expire at the end of this year) can do about that.