The Co-operative Bank posted pre-tax profit down 21% to £81.1m in the nine months to the end of September, as mortgage margins come under pressure and takeover speculation swirls around the bank.
The lender saw its profits slide despite a boost from rising interest rates which pushed up its net interest income by 10% to £363.4m.
Its full-year guidance is unchanged, but the firm says that it is seeing margin pressures at its home loan business, adding that it will be “actively managing mortgage volumes for the remainder of the year”.
The lender also says in a statement that it is currently “exploring potential strategic opportunities, the assessment of which is currently at a preliminary stage”.
The move comes after reports last month that rival Shawbrook Bank made an offer for Co-op Bank and is also weighing up a fresh bid for embattled Metro Bank.
The Co-op Bank agreed a £464m deal to buy Sainsbury’s Bank’s £479m mortgage portfolio, which also has 3,500 customers in August.
Co-op Bank chief executive Nick Slape says in today’s statement: “This is our first portfolio acquisition in more than a decade, and highlights the bank’s turnaround and focus on both organic and inorganic opportunities.”
The lender’s net interest margin – the difference between what it charges to borrowers and what it pays out to savers – lifted 23 basis points to 182bps from a year ago.
Many UK banks have reported a run of strong profits buoyed by Bank of England base rate rises that have lifted 14 times since December 2021 to 5.25%.
However, investors are concerned about tougher competition for savers’ cash and potential loan defaults in a cost-of-living crisis have weighed on the sector.
