The Co-operative Bank remains in the red after tough mortgage competition and payouts for mis-sold loan insurance saw the high street lender post a pre-tax loss of £152.1m.
The Manchester bank has been working to turn around its finances since its near-collapse and rescue by a consortium of US hedge funds in 2017.
The bank posted a £140.7m loss the previous year.
But bloated costs, including the bill for separating its IT systems from its former parent the Co-op Group, have kept it in the red.
The bank booked so-called ‘strategic project’ costs - including the IT project - of £96.6m in 2019. It also made a £63m provision for compensating customers mis-sold payment protection insurance, part of a wider industry scandal.
Despite losses CEO Andrew Bester remained positive.
He said: “In 2019 we successfully completed the first stage of our five year turnaround plan and our achievements have put in place a platform for growth for the years ahead.
“Our IT systems are now separated from the Co-op Group, we have a high-quality, low-risk loan book and our legacy assets are less than 5 per cent of our balance sheet.
Most Read
“While there is still work ahead, we have significantly improved our digital proposition and reinvested in our distinctive ethical brand.
“Our underlying losses are in line with expectations and the higher statutory loss reflects our investment in transformation and the impact of higher than expected levels of PPI claims felt industry-wide.”
He added: “Our core Retail and SME banking performance shows our resilience in a competitive market.
“We delivered controlled mortgage balance growth aimed at protecting margins, and saw increased retail deposits amongst our target customer base. Our SME business began a turnaround this year with deposit balances increasing in a competitive market.
“We believe this offers significant future growth potential and our funding award from the Banking Competition Remedies (BCR), together with investment of our own, is already helping us accelerate our plans.”
The lender has also faced pressure on its profitability from cut-throat mortgage market competition.
Co-op Bank’s net interest margin - the difference between what banks earn from loans and pay for deposits - fell to 1.75 per cent, down from 2.05 per cent the previous year.
Don’t miss
The lender warned ongoing competition and the expected high cost of issuing regulatory-compliant ‘MREL’ debt this year would increase pressure on its margins.
Co-op Bank increased its mortgage book by 5 per cent after generating £3.8bn of new business, while its consumer and small business deposits both grew 6 per cent.
The bank cut ties with The Co-operative Group in 2017, as part of a £700m rescue deal with existing investors to develop as a stand-alone lender.