Financial News

  • 26 August 2014, 10:15

Current Account Exodus At Troubled Co-op Bank

The troubled Co-op Bank has revealed it lost almost 30,000 current account customers in the first half of its financial year.

The bank, which was forced to raise almost £2bn to plug a capital black hole last year, reported significantly lower losses of £75.8m for the period compared to the same time during 2013 and said its wider financial position was improving despite "deep-rooted" problems remaining.

It shed 13% of its permanent staff, closed 46 branches over the six month period and said it lost 28,199 current account holders, although its net customer number losses has since slowed, it said.

It blamed "negative publicity and significant competitor activity" for the near-2% fall.

Sky News reported on Thursday night that the bank was facing demands from some of its biggest shareholders to accelerate an overhaul of its operations and commercial strategy - as losses were expected to continue for two years.

But in its results statement, chief executive Niall Booker said Co-op Bank had made progress since its rescue from near-collapse - a deal that saw the supposedly ethical bank give up control to US hedge funds.

The bank said its capital position had been strengthened following a £400m capital-raising.

Mr Booker said: "Considering the scale of the challenge we faced a year ago, we are encouraged by the progress made to ensure the stability of the bank.

"The core bank continues to remain stable. In the first half of the year more people switched into the bank than in the second half of 2013.

"Although we have also seen an increase in the number of people switching out of the bank, the net numbers remain small relative to our total number of current account customers whose continuing loyalty is deeply appreciated.

"Recent trends suggest this net outflow of retail customers has slowed."

The bank's problems have been at the centre of a wider crisis for the Co-operative Group, which reported a £2.5bn loss for 2013 as its exposure to the bank hit earnings.

A report on the bank's near collapse and subsequent rescue, which saw the group's stake reduced to just 20%, pinned the blame on toxic loans inherited from its disastrous merger with the Britannia building society in 2009 amid a series of management and cultural failures.

In May, the Co-op Group's members backed radical plans by the former City minister Lord Myners to sweep away its existing 20-strong board and replace it with a more plc-style structure, staffed by professionally-trained directors.

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