Co-op’s closed back book losses increase 20-fold
The closed portfolio, Optimum, includes prime residential (both income verified and self-certified), buy-to-let and non-conforming mortgages which in 2012 made a loss of £2.6m.
This reflected increased provisions for loans both in default and forbearance.
Overall the bank reported pre-tax losses of £709.4m which chief executive Niall Booker said reflected the “deep rooted problems” the bank was faced with.
“Clearly there are lessons to be learned from the last few years but it is vital that the new management team focuses on navigating the short-term issues and building the strategy that is targeted at returning the business to health in the future,” he said.
Booker said the team was still in the “early stages” of turning the bank around and did not expect to profitable for some years as legacy issues continued to impact on the bank’s recovery.
Impaired secured residential mortgage balances increased by 9% from £453.7m in December 2012 to £492.4 in June 2013.
But despite its continue problems the Co-op’s retail mortgage lending increased by £0.1bn last year to £1.6bn.
The average loan-to-value on new loans rose from 61% in 2012 to 65% last year while the average loan-to-value across its portfolio remained at 44%.
To tackle past Payment Protection Insurance (PPI) mis-selling complaints the bank has set aside a further £25m for compensation bringing its total PPI to £269.0m.
Booker added: “We have a plan to strengthen our capital base and return the bank to profitability based on our distinctive heritage, the
loyalty of our customers and members and continued support of our staff and I firmly believe this is achievable over time.”