Gross new mortgage lending dropped to £3.8bn, from £4.3bn in 2018, and the lender’s net interest margin (NIM) shrank to 1.75 per cent, following “sustained” pressure.

However, Co-op said its net mortgage balances were up five per cent and it now focused on the second stage of its business transformation plan.

This involves investment in improving customer propositions, such as simplifying its online mortgage platform.

The lender is trying to de-risk and turnaround the business after a disastrous performance which ended with a rescue deal in 2017.

Sponsored

Are your clients ready for the first Making Tax Digital reporting deadline?

Sponsored by BM Solutions

Co-op sells mortgages through its broker only brand Platform, and in a risk overview, acknowledged it is exposed to risks to relationships with intermediaries.

There is also a risk that many borrowers in the buy-to-let sector have yet to operate through an entire economic cycle, and any weakness in their credit quality may impact financial and operational performance, the bank said.

Andrew Bester, chief executive, 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 five per cent of our balance sheet.

“While there is still work ahead, we have significantly improved our digital proposition and reinvested in our distinctive ethical brand.

Bester said losses were in line with expectations and added: “We delivered controlled mortgage balance growth aimed at protecting margins, and saw increased retail deposits among our target customer base.”