The on-going cost of compensation for mis-selling PPI policies has helped keep the Co-op Bank in the red, according to its annual report.
It set aside an additional £39.5 million in 2018 to make its overall provision £537.8 million and it believes the new amount will be enough to pay any future successful claims up to the PPI claims deadline in August.
Average uphold rates for the additional 24,000 complaints it expects to receive it believes will rise to 72% with average compensation per claim of £2,256.
Losses before tax increased to £140.7 million with the bank blaming a tough trading environment and the cost of a major IT project.
The bank has been struggling to turn around its performance since being rescued from total collapse in 2017 by a consortium of American hedge funds who were already investors.
The problem originally started in 2013 when a plan to buy the newly created TSB branches from Lloyds had to be scrapped when a £1.5 billion hole was found in the Co-op’s balance sheet.
Facing collapse, it was bailed out by the consortium, leaving the Co-operative Group parent company with a 20% stake.
However, the problems continued to rise and the bank had to be rescued by a further injection of £700 million from the hedge funds, reducing the Co-op Group’s stake to just 1%.
Denying rising speculation that the problems might be solved with a sale, chief executive Andrew Bester said the bank was committed to ‘a multi-year transformation’
He said: “We’ve done a five-year plan and we’re working towards getting the business into a strongly profitable position by 2023.”
One of the problems has been the difficulty in splitting itself off from the IT systems operated by the Co-operative Group, but Mr Bester said that project was due for completion this year.
The report said when one-off costs were stripped out, the bank had achieved an operating profit of £14.7 million as opposed to an operating loss of £84 million in 2017.