Mortgage payments cost Co-op

THE Co-operative Bank has seen its yearly profit nearly halve after it set aside cash to compensate mortgage customers from more than a decade ago, while the lender said it is still in talks with Coventry Building Society over a possible tie-up.

The bank, which has about 2.6 customers and says it is the UK’s leading ethical bank, said 2023 had been “a year of transformation” as it spent more money on improving its own systems.

It reported a pre-tax profit of £71.4m for 2023, shrinking from the £132.6m it made in 2022.

The business said the decline was driven by one-off costs, including nearly £29m set aside to cover the costs of a redress scheme to compensate mortgage customers from 2011 and 2012.

It followed complaints being upheld by the Financial Ombudsman Service relating to an increase in the rate of its standard variable mortgage rate.

The bank said it would compensate customers regardless of whether or not they had complained.

It also revealed it spent £15m on improving how it manages savings and loans, and around £8m on advisory costs relating to a strategic review of the business.

Chief executive Nick Slape said: “2023 has been a year of transformation and I am extremely proud of what we have achieved.

AWe are ever mindful of the financial challenges that the current economic climate poses for a number of customers and we will continue to support them where needed.”

The bank said it is aware of the risk of more customers falling behind on their repayments, particularly with unemployment in the UK expected to rise this year.

Mr Slape said the bank continues to be in “exclusive discussions” with Coventry Building Society over a possible merger, which was first announced at the end of last year.