London: The Co-operative Bank reported its first annual operating profit for five years in 2018, marking what chief executive Andrew Bester described as a “key milestone” in its recovery efforts after it came to the brink of collapse.
The bank recorded an operating profit of £14.9m (Ugx705billion), compared to an £84m (Ugx394billion) loss in 2017. However, it remained in the red overall thanks to costs such as compensating customers for mis-selling payment protection insurance and attempting to separate its IT systems from the broader Co-operative Group. A pre-tax loss of £140.7m (Ugx658billion) was little changed from the previous year.
Despite its name, the Co-operative Group no longer owns the bank, which was taken over by bondholders in 2017. The bank first ran into trouble after the disastrous takeover of Britannia Building Society exposed it to large numbers of bad property loans, and its problems were exacerbated by a lack of banking expertise among some of its leadership.
However, Mr. Bester, who last summer became its fifth chief executive in seven years, has said it is finally ready to return to growth and re-enter business areas it was forced to pull out of. 2018 was the bank’s best year for mortgage completions since 2010, and it said it would look to “enhance and diversify” its product offering for retail and business customers this year. Still, it did not give a set date by which is expected to return to full profitability.
Mr. Bester said political uncertainty and a highly competitive market had created an “extremely challenging banking environment”. But despite that, he said the bank had made “sizeable progress” in its transformation, with the first operating profit since 2013 an important step to achieving sustainable earnings. “In the short term, it remains a difficult environment for all banks and we continue to expect pressure on income, but longer term we have the right ingredients to achieve sustainable success,” Mr. Bester said.
(source/ Financial Times)