THE CO-OPERATIVE Bank has revealed 38,000 customers left the bank in the first six months of the year and conceded it has more work to do before the embattled firm resolves its "deep-rooted issues".
The bank, which was forced to bring in new investors to avoid collapse last year, cautioned that it would not turn a profit until 2016 at the earliest, though half-year losses narrowed to £75.8 million from £845m a year ago.
Customers pulled a total of £1.5 billion from Co-op accounts during the period, including £700m from high street accounts and about £1bn that was handed back from fixed-term products that had matured.
The bank lost 38,000 accounts and gained 9,700, meaning its customer base shrank two per cent in the period. Chief executive Niall Booker said the loss of any customer is a "mortal wound", but added that the exodus from the stricken bank could have been worse.
"Considering the amount of time we spent getting negative publicity, the reduction is not significant and probably less than we expected," added Mr Booker.
The Co-op Bank, which has been run under an ethical policy since 1992, has raised a total of £1.9bn to shore up its finances since uncovering a £1.5bn capital hole in May 2013 after a failed bid to buy 632 branches from Lloyds.
The emergency measures have cut the Co-operative Group's stake in the bank to 20 per cent and handed control to bondholders including a group of US hedge funds.
The financial turmoil has been compounded by the arrest and subsequent conviction of Paul Flowers, the bank's former chairman, for drug offences. The Co-op Group is overhauling its structure in the wake of the furore over his role at the bank.
The Co-op Bank is still working through its balance sheet to revalue its assets following the discovery of the capital hole. Staff tasked with removing distressed and non-core assets from the bank recently found that a previous impairment charge had been too pessimistic, leading to a £88.2m gain in the half-year results.
The bank has disposed of £1bn-worth of non-core assets this year, leaving £11.5bn on the books.
No new legal or conduct risks were found in the period. Total charges, including money set aside as compensation for mis-sold payment protection insurance (PPI), was £39m, down from £163m a year ago.
"We are ahead of schedule in the disposal of non-core assets and have improved governance, particularly at board level. However, the issues we continue to face in building a sustainable business are deep rooted and there remains much to be done," said Mr Booker, a veteran of HSBC who joined the firm in June 2013.
Co-op Bank has cut more than 1,000 staff over the past year, taking its headcount to 5,860 and reducing its salary costs by 10 per cent. The firm has also closed 46 branches, or 16 per cent of its network. Mr Booker yesterday announced 25 further branch closures and said he also expects to cut more jobs.
As well as helping to reduce costs, Mr Booker said the closures were part of the evolution of the way Britons bank. "We just don't know what the ultimate branch network looks like in our industry," he said, noting that customers are increasingly using the internet to access accounts.
Mr Booker plans to spend more on marketing the bank's products to compete with "very fierce" spending by rivals in the wake of new rules making it easier for customers to switch accounts. The bank said yesterday the pace of account losses has already slowed in recent months.
The Co-op Bank improved its core equity tier one capital ratio, a measure of financial strength, to 11 per cent by the end of June and it expects to remain significantly above its 10 per cent goal at the end of the year.
Co-op Bank embarked on a £400m fundraising in May after its capital ratio slipped to 7.2 per cent, perilously close to the Bank of England's requirement of seven per cent.
The bank's executives are in discussions with the central bank's Prudential Regulation Authority about the outcome of its stress tests, which will judge the Co-op Bank on its position at the end of 2013.
"We are comfortable with the dialogue" ahead of the results later this year, said John Bains, the bank's interim chief financial officer.