Co-op Bank: Brexit impact may delay recovery plans
The Co-operative Bank has warned the impact of the Brexit vote could hold back its recovery plans as lenders face "challenging" times amid interest rate cuts and wider economic woes.
The troubled group said the Bank of England's move to slash interest rates could make it even harder to grow revenues, while the mortgage market may also be hit following the decision to quit the EU.
Half-year results showed the group narrowed half-year pre-tax losses to £177 million from £204.2 million a year earlier, but much of the improvement was down to one-off boosts, including a £58.1 million windfall from the sale of its share in Visa Europe.
Outgoing boss Niall Booker said while the group had yet to see any immediate impact from the Brexit vote, there were considerable challenges ahead.
He said: "Today's m arket conditions are challenging for all retail-focused banks and the macroeconomic uncertainty following the result of the EU referendum, including the likelihood of lower for longer interest rates, may restrict our ability to grow revenue in the short term."
The Co-op Bank said it would continue to post losses throughout this year and next as cost cutting fails to offset spending on online banking projects and its overhaul.
It cautioned the impact of the Brexit vote may mean a weaker-than-expected return to profit, although it stuck by aims to see "sustainable" earnings in its core bank by late 2017.
The core bank posted underlying earnings of £17.1 million in the first six months of 2016, against losses of £26.2 million a year earlier.
It is more than half-way through a turnaround plan after nearly collapsing in 2013 following the discovery of a £1.5 billion black hole in its balance sheet.
The bank had to be rescued by bondholders including US hedge funds in a move which saw the wider Co-op group's ownership of the bank reduced to a 20% stake.
Its half-year results showed progress in boosting its mortgage book, with net customer loans rising to £15.4 billion in the first half from £14.7 billion at the end of 2015.
The group shed around 8,000 current account customers year-on-year in the first half, down 0.5% to 1.42 million.
It also revealed another £33.5 million has been put by for the payment protection insurance (PPI) scandal after the City watchdog proposed a later-than-expected deadline for claims.
Cost-cutting efforts under its turnaround saw jobs axed and 54 branches shut in the first half, with another five due by the end of the year.
The group failed a Bank of England stress test in December 2014 - a key measure of capital strength - which assesses the ability of major UK lenders to withstand another financial crisis.
Its latest set of results revealed it still does not have enough of a buffer to withstand a "severe stress scenario".
Mr Booker said the group had not ruled out the possibility of a stock market listing, although he stressed it was not "on the agenda any time soon".
It confirmed Mr Booker will be succeeded on January 1 next year by recently appointed deputy chief executive Liam Coleman.