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Co-op Bank to explore ‘strategic opportunities’ as profits fall

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  • 08/11/2023
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Co-op Bank to explore ‘strategic opportunities’ as profits fall
The Co-operative Bank has confirmed it is exploring “potential strategic opportunities” as it posted a decline in profits.

In its Q3 results, it said it was at the preliminary stage of this process following three years of recovery and growth. It added: “There is no guarantee that such discussions will result in any eventual transaction.” 

Earlier this year, it was reported that Aldermore was considering a takeover of the Co-op and was up against Shawbrook, Paragon and OSB for a potential merger or acquisition. 

The Co-op posted an underlying profit after tax of £97.9m, down from £103.1m during the same period last year. Its profit before tax totalled £81.1m, lower than £102.8m the year before. 

It said its operating expenditure rose by 17 per cent to £316.2m, mainly driven by its investment in its mortgage and savings platform. 

Its net interest margin improved from 159 basis points last year to 182 this year. The lender’s net interest income also increased from £329.1m to £363.4m. It said both benefitted from increases in the base rate. 

It closed the period with a net impairment credit of £600,000 compared to a £1.3m charge last year. 

The lender said its asset quality ratio remained strong, reflecting its “low-risk lending profile”. 

At the end of Q3, its average mortgage loan to value (LTV) was 55.2 per cent, slightly higher than the 53.5 per cent it came to in full-year 2022. Accounts that were more than three months in arrears rose slightly too, from 0.13 per cent to 0.17 per cent. 

 

A turnaround 

Nick Slape, chief executive of the Co-operative Bank, said: “I am pleased to announce our profit before tax of £81.1m, with an underlying profit of £97.9m and statutory return on tangible equity of 12.3 per cent, as we continue to manage credit quality effectively, with a stable net interest margin and strong deposit franchise. 

“In the quarter, we acquired Sainsbury’s mortgage portfolio comprised of approximately 3,500 customers and c.£500m of balances. This is our first portfolio acquisition in more than a decade, and highlights the bank’s turnaround and focus on both organic and inorganic opportunities. 

Our mortgage and savings transformation programme continues at pace with mortgage originations now live on a new rebranded platform, ‘The Co-operative Bank for intermediaries’, as we start to see the benefits of our accelerated investment. 

He added: “We have strong levels of capital and liquidity, with full year guidance unchanged across all key indicators.” 

 

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