Co-op Bank hails ‘landmark’ 2024 despite drop in earnings

The Co-operative Bank has revealed shrinking profits but hailed 2024 as a “landmark” year as it prepares to return to mutual ownership through its merger with Coventry Building Society.

The banking group said it generated lower income and sustained higher costs, which dragged on its half-year earnings.

It reported a pre-tax profit of £24.2 million for the first six months of the year, more than half the £61.8 million reported this time last year.

It came as the impact of higher borrowing costs begins to wear off for the UK’s high street banks, which had been benefiting from charging more for loans.

Co-op Bank also said that its business expenses increased by 6% compared with the year prior, driven partly by staff wage rises and higher levels of customer fraud remediation, which doubled to £12.5 million.

It flagged a slight uptick in the level of borrowers falling into arrears on repayments thanks to higher living costs and interest rates, but stressed that the level remained low.

Meanwhile, the lender said 2024 would be a “landmark year” as it hailed the completion of its transformation plan which has spanned several years.

It embarked on the turnaround in 2019 and it has included significant cost-cutting, including reducing staff, a £100 million IT simplification programme, and has seen it return to a profit.

It is expecting to complete a £780 million deal to be bought by rival lender Coventry Building Society in early 2025.

But merging the two banking firms could take several years as part of a major operation that will create a group with millions of customers and about £89 billion worth of assets.

It means Co-op Bank will return to a mutual structure, meaning it is owned by individual members rather than shareholders and investors like most UK banks.

Co-op Bank said its customers will “not see any immediate changes as we continue to operate separately” until the integration is complete.

“The combined business will be a significantly larger organisation and joining the bank and the society together brings more products, services and value to both existing and new customers,” it said.