The Co-Operative Bank has seen mortgage and completions “above planned expectations” during the first three months of this year.
The first quarter trading statement, published today (20 May), showed “continued progress” in implementing its turnaround, with completions totalling £500m.
The acceleration of de-leveraging non-core assets continue to improves its resilience, the bank said.
In May, it offloaded a portion of the Optimum loan book that was taken on after acquiring the Britannia Building Society in 2009. The bank shed £1.5bn of risky mortgages as part of plans to boost its capital buffer after failing the UK’s stress test.
The £6bn Optimum portfolio comprised buy-to-let, self-certification and subprime mortgages, which were profitable, but require the bank to set aside extra capital. The sale boosted the bank’s capital buffer to 13.9 per cent.
The results said the deleveraging strategy is “on track” against a revised plan accepted by the Prudential Regulation Authority at the time of Bank of England stress tests.
The Co-Operative also reiterated that its cost reduction programme is going to plan, with 57 branch closures set be completed by July.
Planned cost reductions in 2015 will be through improved processes; efficiency savings through outsourcing of some back office functions; rationalisation of ATM network following the disposal of group ATMs; improved management and control of third party costs.
As for progress addressing legacy conduct issues, the bank said that conduct remediation activities will be “substantially progressed” this year.
Niall Booker, chief executive, said that during the first quarter they have continued to progress a turnaround plan based on de-risking the business and reshaping the bank around individual and small business customers.
“The initial securitisation of part of the Optimum portfolio is an important step in further reducing our risk profile and increasing our resilience.
“In addition, although the core bank remains very much a work in progress, we are beginning to see performance improve and the launch of a series of competitive product offerings is testament to how far we have come in the last year,” he stated, adding that there is considerable work ahead to address legacy issues across all areas of the business.
“Furthermore, the bank remains exposed to external macroeconomic conditions, including the timing of future interest rate rises and market conditions to support successful asset disposals, but we are pleased with the progress management has made in the areas we control and in what remains the early stage of our recovery.”
donia.o’loughlin@ft.com
