Co-op Bank buoyed by interest rate rises as takeover speculation continues
The Co-operative Bank has reported a jump in income as the latest lender to be boosted by higher interest rates which have pushed up the cost of borrowing.
The company said its net interest income – the difference between what a bank charges for loans and pays for savings – surged by a fifth to £120 million, compared to £100 million the same time last year.
This was driven up by rising interest rates, with the Bank of England pushing up the base rate to 4.25% last month making it more expensive to borrow and more attractive to save.
Co-op Bank, which has about 2.5 million retail customers and says it is the UK’s leading ethical bank, primarily offers secured loans, meaning it is tied to a customer’s property and poses a lower risk to lenders.
It revealed just 0.14 per cent of its mortgage accounts were more than three months in arrears in the first quarter.
Its quarterly pre-tax profit edged up slightly to £30.6 million, as the once-flailing bank became profitable two years ago after being rescued by a group of hedge funds in 2017.
The bank’s reputation was dented after its former chairman and Methodist minister Paul Flowers was caught up in a drugs and sex scandal, leading him to be banned from the financial services industry by the Financial Conduct Authority.
But chief executive Nick Slape, who has been at the helm since late 2020, has said the bank’s turnaround has gathered steam recently and it is progressing well.
The first quarter results follow recent reports that Co-op Bank could be considering putting itself up for sale.
The bank declined to comment on the speculation, but Slape has previously indicated his business could become an attractive target for potential buyers.
He told the Mail on Sunday last month: “It goes with progress. If the bank is progressing and performance is better, somebody might want to look at us.”
The bank made a bid for high street rival TSB in 2021, but the move did not lead anywhere as TSB was not looking for a sale.
It was also reportedly eyeing up a bid to buy Sainsbury’s Bank’s £650 million loan portfolio in February.
Slape said on Friday: “I remain confident that the bank is well-positioned in the current uncertain macroeconomic environment, with surplus capital and liquidity and a low-risk simple balance sheet.”
It follows banking giants Barclays and Natwest Group reporting better-than-expected profits for the first quarter.
Press Association – by Anna Wise