There was some good and some bad to be gleaned from the Co-operative Bank plc (LSE:CPBB)’s 2023 earnings announced today.
Regarding the latter, statutory profit before tax of £71.4 million was nearly half that of 2022, due to what management labelled as “exceptional redress on legacy mortgage business, strategic transformation and advisor costs”.
However, a £58 million taxation credit brought profit after tax (PAT) above £129 million compared to a PAT of £22 million in 2022 (this was due to a £110 million tax charge in 2022).
Meanwhile, net interest income improved by 4% to £477 million on a 1.8% net interest margin.
Chief executive Nick Slape espoused the bank’s improved credit rating, having been upgraded three notches to BB+ in twelve months from Fitch.
“Over time, improvements in our credit rating will enable us to further reduce our funding costs and grow our SME customer franchise,” Slape remarked.
“The Bank has made an excellent start to 2024,” he continued. “We received over 12,500 new current account applications in January, representing an increase of over 300% versus the same period last year.
“New mortgage origination has also been strong with £1.2 billion applications in January.”
Looking to the future, Slape considered the outlook to be “uncertain”, but Co-op should be supported by “a low-risk balance sheet and strong capital and liquidity positions”.
Co-op’s CET1 ratio increased from 19.8% to 20.4%.
In conjunction with these results, Co-op’s board announced a debut dividend of 0.13p per share for 2023.
Commenting on the divi, Slape said: “Our objective is to continue distributions to shareholders through a progressive and sustainable ordinary dividend policy, whilst maintaining the flexibility to undertake returns of surplus capital, when appropriate.”
Regarding the potential merger with Coventry Building Society, management said “These discussions remain ongoing as we continue to evaluate the merits of the combination”.