Alongside its sale announcement, the bank and Capita, which provides mortgage administration services to the Co-op and its intermediary arm, Platform, announced it had resolved a contractual dispute with Capita agreeing to continue providing services to the lender. However, Capita will halt work on its overhaul of Co-op’s IT systems.
Reports in September last year revealed that the two firms were at loggerheads after Capita claimed that Co-op Bank was withholding payment for mortgage services.
The Co-op Bank said it expects to report a “significant” loss for 2016 in its full-year results next month, although it predicts this is likely to be less than its 2015 loss.
In a statement from its CEO, Liam Coleman, to the Co-Op’s customers, he said the bank would also consider alternative options to build its capital position.
Coleman said: “We are stronger in a number of areas today than in 2013. We have worked hard to rebuild our customer proposition, differentiated by our values and ethics and strong customer service, which we know you value. We have also made considerable progress in fixing major legacy issues and making the Bank more resilient overall, underlined this weekend by the successful migration of our mainframe banking systems to our partner IBM, which marked a major milestone on our journey to turn the Bank around.
“I thank our colleagues for all their hard work and commitment to deliver this, and our customers for their patience and understanding during the recent systems downtime. However, our ability to continue to build capital for the future has been adversely impacted by the lower for longer interest rate environment and the greater than expected cost of fixing the legacy issues of the past.”
Co-op said its decision to embark on a sales process would have no direct impact on its products or its service to customers.
A spokesperson for the Prudential Regulation Authority (PRA) welcomed the move: “We will continue to assess the bank’s progress in building greater financial resilience over the coming months.”