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Co-operative Bank swings to H1 loss, expects lower FY'19 net interest margin

Co-operative Bank PLC swung to losses in the first half from a year-ago profit and revised its guidance for its net interest margin for the 2019 full year.

The U.K. lender posted first-half losses attributable to equity shareholders of £36.0 million, compared with a £41.4 million profit in the year-ago period. On a statutory basis, the bank's pretax loss for the half narrowed year over year to £38.5 million from £39.5 million.

Net interest income fell to £167.9 million from the year-ago £174.5 million. Net fee and commission income totaled £11.1 million, compared with £11.0 million a year earlier.

The bank booked £2.5 million in net customer redress charges, down on a yearly basis from £11.0 million, mainly related to provisions for mis-sold payment protection insurance claims. This brings the total provisions taken over the matter to £38.7 million. Co-op Bank said the provision will be reassessed in the second half.

Net credit impairments came in at £100,000, compared with a gain of £4.1 million in the year-ago period. Total operating expenses increased to £248.4 million from the year-ago £241.0 million.

The bank's net interest margin in the first-half was 1.83%, a decrease from 2.08% in the year-ago period, primarily owing to lower mortgage margins in a competitive market. For the 2019 full year, the bank expects its net interest margin to further go down to roughly 1.70%. This compares with a previous guidance of 1.75% to 1.80%.

As of June-end, the bank's common equity Tier 1 ratio was 21.9%, down from 22.3% as of 2018-end. Co-op Bank also upgraded its CET1 ratio guidance for the full year, to around 20.5% from around 19% previously.

Co-op Bank also said it plans to price £200 million in Minimum Requirements for own funds and Eligible Liabilities-compliant bonds in the second half.