Co-op Bank two years off returning to profit

THE boss of Co-operative Bank warned it faces at least two more years in the red and will close dozens more branches this year despite more than halving its annual losses in 2014.

Co-op Bank failed the Bank of England's stress testsGETTY

Co-op Bank failed the Bank of England's stress tests

Industry veteran Niall Booker, who joined as chief executive in 2013, said the bank had taken "major steps forward" as it seeks to rebuild from near-collapse two years ago following a disastrous merger with Britannia Building Society.

It has strengthened its finances after being the only one of eight UK lenders to fail the Bank of England's stress tests in December but lost more than 50,000 current accounts - 4 per cent of its 1.4 million total - although this stabilised in the second half.

Former HSBC executive Booker was paid £3.1million last year and has agreed a contract up to the end of 2016 which could deliver a maximum pay package of £4.97million this year if he meets "stretching targets".

The performance of the core bank has begun to stabilise and we aim to build on this in 2015

Niall Booker, Chief executive

Co-op Bank reduced its pre-tax loss from £632.8million to £264.2million due to a healthier position on bad debt and as conduct-related charges, including payment protection insurance, dropped from £411.5million to £101.2million.

The bank indicated it is still some way off a stock market listing. It had hoped to float soon after a rescue deal at the end of 2013 to plug a £1.5billion black hole in its finances but will now "regularly review" plans.

A refinancing left bondholders - led by US hedge funds - in control of the business although the mutually owned Co-op Group remains the largest shareholder with 20 per cent.

Booker said: "We are in the early stages of the turnaround. There are a number of matters where the bank does not yet meet regulatory requirements and expectations. In the second half of 2014 we began to invest in the brand, to more actively market our products and also made a significant investment in our digital offering.

"The performance of the core bank has begun to stabilise and we aim to build on this in 2015."

The bank axed 72 branches last year with the loss of nearly 1,000 staff.

It plans to close 57 this year.

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