REG - Co-Operative Bk Fin. Co-Operative Bank - First Quarter Trading Update 2022

VisaAnnouncement

05/05/2022 08:30

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220505:nRSE3710Ka&default-theme=true

RNS Number : 3710K  Co-Operative Bank Finance PLC (The)  05 May 2022

 

 Nick Slape (CEO) and Louise Britnell (CFO) will host a video conference on 5
 May 2022 to present the first quarter trading update and a Q&A session at
 9am (UK time).

 The video conference will be held via BlueJeans video conferencing.

 To request access to the call please email
 investorrelations@co-operativebank.co.uk for the mandatory entry details.

 Participants can join the conference via:

 The BlueJeans mobile app; available from your respective app store (video and
 audio)

 Direct from a web browser (video and audio)

 Or by telephone (audio only)

 Additional materials are available on the Bank's investor relations website
 which can be found at the following address:

 www.co-operativebank.co.uk/about-us/investor-relations/
 (http://www.co-operativebank.co.uk/about-us/investor-relations/)

 

 

 BASIS OF PRESENTATION

 The Co-operative Bank Holdings Limited is the immediate parent company of The
 Co-operative Bank Finance p.l.c. and the ultimate parent company of The
 Co-operative Bank p.l.c. In the following pages the term 'Group' refers to The
 Co-operative Bank Holdings Limited and its subsidiaries. The term 'Finance
 Group' refers to The Co-operative Bank Finance p.l.c. and its subsidiaries.
 The term 'Bank' refers to The Co-operative Bank p.l.c. and its subsidiaries
 which are consolidated within the Finance Group and then ultimately the Group.
 Unless otherwise stated, information presented for the Group equally applies
 to the Bank and the Finance Group.

 Underlying basis: The statutory results are adjusted to remove certain items
 that do not promote an understanding of historical or future trends of
 earnings or cash flows, which therefore allows a more meaningful comparison of
 the Group's underlying performance.

 Alternative performance measures: The Group uses a number of alternative
 performance measures, including underlying profit or loss, in the discussion
 of its business performance and financial position.

 

First Quarter Trading Update 2022

5 May 2022

 

The Co-operative Bank ('the Bank') is pleased to provide an update on its
performance in the three months ended 31 March 2022.

 

·      Profit before tax of £30.5m and underlying profit of £27.5m;
fifth consecutive quarter of profitability

·      Mortgage balances stable in a competitive market; pipeline of
c.£0.9bn

·      £250m of MREL - qualifying funds issued; first issuance under
our Green, Social and Sustainability (GSS) Financing Framework

·      Substantial progress made on our ESG commitments

 

 

Nick Slape, Chief Executive Officer, said:

 

"Our Q1 2022 profit of £30.5m is our 5(th) consecutive quarterly profit and
marks 4 quarters of sequential quarter on quarter underlying profit growth. I
am really proud to report on the progress that we are making with our
transformation plan and other commitments.

 

In March we issued £250m of MREL-qualifying funds, the inaugural issuance
under our Green, Social and Sustainability Financing Framework. I was
encouraged by the number of new investors involved in this transaction, the
result of the strong link to ESG commitments and the acknowledgment of the
progress the Bank has made in its turnaround. The issuance ensures good
progress towards meeting end-state MREL requirements by the deadline of 1
January 2023, and is further evidence of market confidence in the Bank, with
pricing improved by 3pp compared to the MREL senior unsecured issuance at the
end of 2020.

 

I would like to thank our customers and colleagues for their huge generosity
and the support shown to our charitable partners in response to the ongoing
humanitarian crisis in Ukraine. I was extremely proud of the speedy and
decisive response to our appeals, and in our 150th anniversary year, it serves
as a timely reminder of how co-operative values remain as relevant now as they
were when we were first created.

 

We are currently mid-way through our ambitious transformation plan to
rationalise our mortgage and savings platforms and bring our mortgage
servicing operations in house. These changes enable us to invest in simpler
transactional journeys with an enhanced customer experience. The progress we
have made along with the steps we are taking to improve recruitment and
retention in light of the challenging environment give me the confidence that
we will achieve the objectives set at the start of the year."

 

INCOME STATEMENT (£m)

                                           3 months ended 31 March
                                     2022                2021
 Net interest income                       99.9          71.2
 Other operating income                    10.3          10.0
 Total income                              110.2         81.2
 Operating expenditure                     (84.7)        (82.0)
 Impairment                                (0.5)         (1.3)
 Non-operating income                      5.5           9.3
 Profit before tax                         30.5          7.2
 Taxation                                  (37.5)        (2.3)
 (Loss) / Profit after tax                 (7.0)         4.9

 Adjustments
 Exceptional project expenditure           1.7           4.3
 Other exceptional (gains) / losses        (4.7)         (8.9)
 Underlying profit before tax              27.5          2.6

 Key ratios:
 Net interest margin (bps) (1)             146           119
 Adjusted RoTE (%) (2)                     12.0          1.2
 Cost:income ratio (%) (3)                 73.2          90.6
 Asset quality ratio (bps) (4)             0.9           2.7

 

1. Annualised net interest income over average interest earning assets

2. Underlying profit minus current tax over CET1 resources

3. Total statutory expenditure over total statutory income

4. Annualised impairment charge over average customer assets

 

PERFORMANCE HIGHLIGHTS

 

 

Profit before tax of £30.5m and underlying profit of £27.5m

 

·      Total income of £110.2m; includes net interest income and other
operating income, has increased 36% in comparison to the three months ended 31
March 2021

·      Net interest income has increased by 40% to £99.9m (Q1 21:
71.2m); driven by higher mortgage balances at improved margins, supported by
improving deposit margins following the increases in the base rate to 75bps

·      Net interest margin of 1.46% (Q1 21: 1.19%)

·      Operating expenditure increased by 3% to £84.7m (Q1 21:
£82.0m); higher staff costs relating to performance related pay and £1.7m of
exceptional spend relating to our mortgage and savings simplification
programme

·      Improved cost:income ratio to 73.2% (Q1 21: 90.6%)

·      Impairment charge of £0.5m (Q1 21: £1.3m); low levels of
defaults across the portfolio

·      £5.5m non-operating income (Q1 21: £9.3m); includes the sale of
a small legacy loan book as well as the revaluation of Visa shares

·      Tax charge of £37.5m reflects a reduction in the value of the
Bank's deferred tax assets due to a decrease in the banking surcharge from 8%
to 3%

 

 

Mortgage balances stable in a competitive market

 

·      Average application margins in Q1 22 reduce by 8bps to 80bps from
Q4 21

·      Net mortgage growth of £72m in the quarter; actively reduced new
business volumes to preserve Bank margins

·      Deposit balances remain stable over the period with an LCR of
230.5%

 

 

£250m of MREL - qualifying funds issued

 

·      Issuance of £250m MREL - qualifying funds (accounting
recognition from April) with a coupon of 6% reflecting the market's confidence
in the Bank's ongoing improved operational and financial performance; existing
MREL - senior capital issued at 9% in November 2020

·      CET1 ratio of 18.1% (FY 21: 20.7%); reduction in Q1 22 of 2.6pp
(driven by the impact of regulatory adjustments for PS11/20 and software
intangibles). RWAs of £4.9bn (FY 21: £4.4bn)

·      Total capital ratio of 22.2% (FY 21: 25.4%)

 

 

Substantial progress made on our ESG commitments

 

·      In consideration of financial pressures faced by colleagues, we
have committed to make a payment that contributes towards the rising cost of
living

·      We have completed our first issuance under our inaugural Green,
Social and Sustainability (GSS) Financing Framework

·      Collectively with our customers, colleagues and suppliers we have
raised over £440,000 towards the DEC Ukrainian Humanitarian Appeal, which
includes a donation of £100,000 from the Bank

·      £50,000 donation to our long-standing partner, Amnesty
International UK to support their work in upholding the rights of Ukrainian
refugees

·      In March we sent an open letter to the Prime Minister calling on
the UK to intensify the response to support the millions of refugees fleeing
Ukraine

 

SEGMENTAL PROFIT / (LOSS) (£m)

 Q1 22                                   Core                    Legacy & central items             Group
                                         Retail  SME     Total   Unallocated
 Net interest income / (expense)         88.5    13.4    101.9   (2.0)                       0.0    99.9
 Other operating income                  5.9     4.3     10.2    0.1                         0.0    10.3
 Total income                            94.4    17.7    112.1   (1.9)                       0.0    110.2
 Operating expenditure                   (66.6)  (14.7)  (81.3)  (0.9)                       (2.5)  (84.7)
 Credit impairment gains / (losses)      (1.0)   (0.2)   (1.2)   0.7                         0.0    (0.5)
 Non-operating income                    -       -       -       -                           5.5    5.5
 Profit / (loss)                         26.8    2.8     29.6    (2.1)                       3.0    30.5

 

 

 Q1 21                                   Core                    Legacy & central items             Group
                                         Retail  SME     Total   Unallocated
 Net interest income / (expense)         62.5    10.7    73.2    (2.0)                       0.0    71.2
 Other operating income                  6.6     3.6     10.2    (0.2)                       0.0    10.0
 Total income                            69.1    14.3    83.4    (2.2)                       0.0    81.2
 Operating expenditure                   (63.8)  (12.5)  (76.3)  (1.0)                       (4.7)  (82.0)
 Credit impairment gains / (losses)      (0.9)   (1.6)   (2.5)   1.2                         0.0    (1.3)
 Non-operating income                    -       -       -       -                           9.3    9.3
 Profit / (loss)                         4.4     0.2     4.6     (2.0)                       4.6    7.2

 

 

SEGMENTAL ASSETS AND LIABILITIES (£m)

 Q1 22                    Core                         Legacy & central items      Group
                          Retail    SME      Total
 Segment assets           19,818.2  414.4    20,232.6  8,825.6                     29,058.2
 Segment liabilities      17,346.4  3,416.4  20,762.8  6,515.2                     27,278.0

 

 FY 21                    Core                         Legacy & central items      Group

                          Retail    SME      Total
 Segment assets           19,756.0  441.7    20,197.7  9,125.6                     29,323.3
 Segment liabilities      17,604.4  3,461.0  21,065.4  6,506.0                     27,571.4

 

 

SELECTED KEY PERFORMANCE INDICATORS

 

 % (unless otherwise stated)                          Q1 22  2021   Change
 CET1 ratio                                           18.1   20.7   (2.6)
 Total capital ratio                                  22.2   25.4   (3.2)
 Risk weighted assets (£m)                            4,911  4,373  538
 Leverage ratio (PRA) (1)                             3.7    3.8    (0.1)
 Liquidity coverage ratio                             230.5  241.8  (11.3)
 Loan to deposit ratio                                100.5  99.1   1.4
 Average core mortgage LTV                            55.9   56.8   (0.9)
 Core mortgage accounts > 3 months in arrears         0.14   0.13   (0.01)
 NPL as a % of total exposures                        0.3    0.3    -

 

1.     Calculated as per PRA definition, excluding Bank of England
reserves

 

Investor enquiries:

investorrelations@co-operativebank.co.uk

Gary McDermott, Treasurer and Head of Investor Relations: +44 (0) 7811 599495

 

Media enquiries:

Daniel Chadwick, Communications: +44 (0) 7724 701319

Nicki Parry, Communications: +44 (0) 7734 002983

Alasdair Todd, Maitland/AMO: +44 (0) 7825 867343

 

About The Co-operative Bank

The Co-operative Bank p.l.c. provides a range of banking products and services
to about 3.1m retail customers and c.95k small and medium sized enterprises
('SME'). The Bank is committed to values and ethics in line with the
principles of the co-operative movement. The Co-operative Bank is the only
high street bank with a customer-led ethical policy, which gives customers a
say in how their money is used. Launched in 1992, the policy has been updated
on five occasions, with new commitments added in January 2015 to cover how the
Bank operates its business, products and services, workplace and culture,
relationships with suppliers and other stakeholders and campaigning.

 

The Co-operative Bank p.l.c. is authorised by the Prudential Regulation
Authority and regulated by the Financial Conduct Authority and the Prudential
Regulation Authority. The Co-operative Bank p.l.c. eligible customers are
protected by the Financial Services Compensation Scheme in the UK, in
accordance with its terms.

 

Note: all figures contained in this announcement are unaudited. This
announcement contains inside information.

.

 

FORWARD-LOOKING STATEMENTS

 

This document contains certain forward-looking statements with respect to the
business, strategy and plans of the Group (including its updated long-term
forecast) and its current targets, goals and expectations relating to its
future financial condition and performance, developments and/or prospects.
Forward-looking statements sometimes can be identified by the use of words
such as 'may', 'will', 'seek', 'continue', 'aim', 'anticipate', 'target',
'projected', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe',
'achieve', 'predict', 'should' or in each case, by their negative or other
variations or comparable terminology, or by discussion of strategy, plans,
objectives, goals, future events or intentions.

 

Examples of such forward-looking statements include, without limitation,
statements regarding the future financial position of the Group and its
commitment to its plan and other statements that are not historical facts,
including statements about the Group or its directors' and/or management's
beliefs and expectations. Any such forward-looking statements are not a
reliable indicator of future performance, as they may involve significant
stated or implied assumptions and subjective judgements, which may or may not
prove to be correct. There can be no assurance that any of the matters set out
in forward-looking statements are attainable, will actually occur, will be
realised, or are complete or accurate. Past performance is not necessarily
indicative of future results. Differences between past performance and actual
results may be material and adverse.

 

For these reasons, recipients should not place reliance on, and are cautioned
about relying on, forward-looking statements as actual achievements, financial
condition, results or performance measures could differ materially from those
contained in the forward-looking statement. By their nature, forward-looking
statements involve known and unknown risks, uncertainties and contingencies
because they are based on current plans, estimates, targets, projections,
views and assumptions and are subject to inherent risks, uncertainties and
other factors both external and internal relating to the Group's plan,
strategy or operations, many of which are beyond the control of the Group,
which may result in it not being able to achieve the current targets,
predictions, expectations and other anticipated outcomes expressed or implied
by these forward-looking statements. In addition, certain of these disclosures
are dependent on choices relying on key model characteristics and assumptions
and are subject to various limitations, including assumptions and estimates
made by management. No representations or warranties, expressed or implied,
are given by or on behalf of the Group as to the achievement or reasonableness
of any projections, estimates, forecasts, targets, prospects or returns
contained herein. Accordingly, undue reliance should not be placed on
forward-looking statements.

 

Any forward-looking statements made in this document speak only as of the date
of this document and it should not be assumed that these statements have been
or will be revised or updated in the light of new information or future events
and circumstances arising after today. The Group expressly disclaims any
obligation or undertaking to provide or release publicly any updates or
revisions to any forward-looking statements contained in this document as a
result of new information or to reflect any change in the expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based, except as required under applicable law or
regulation.

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTFLFEDERISIIF