* Net 28,199 customers desert bank in first half
* CEO says each customer loss is "mortal wound"
* H1 pretax loss 75.8 mln stg vs year-ago 844.6 mln loss
* 21 percent of staff axed during past year
* 46 branches closed since start of the year
(Adds CEO comments, details)
By Matt Scuffham
LONDON, Aug 22 Britain's Co-operative Bank
said it lost around 38,000 customers in the first
half of 2014, following its near collapse last year and a drugs
scandal involving former chairman Paul Flowers.
Chief Executive Niall Booker told reporters he regarded the
loss of any customer as a "mortal wound" but argued the numbers
leaving were not as bad as might have been expected, given the
negative publicity that has hounded the bank.
"When you consider what the bank has gone through I don't
think it's a bad outcome, but I certainly don't want to appear,
or nor am I, complacent about it," Booker said.
The customer loss was revealed on Friday after the bank
reported a narrower loss for the first six months of 2014, after
axing jobs and closing branches following a restructuring that
led to it falling under the control of bondholders.
The bank was left fighting for its survival after a 1.5
billion pound ($2.5 billion) capital shortfall was exposed in
June last year following a failed bid to buy hundreds of
branches from Lloyds Banking Group.
It was rescued when bondholders including U.S. hedge funds
agreed to a recapitalisation which meant Co-op Group
went from outright owner to holding just a 20 percent stake.
The bank's problems were exacerbated when former chairman
Flowers pleaded guilty to drug possession following a stream of
lurid headlines in British tabloid newspapers.
The negative publicity likely resulted in some customers
becoming disillusioned with the bank, which had built its
reputation around ethical credentials such as not investing in
weapons, tobacco and alcohol manufacturers.
Despite that, Co-op Bank said it had attracted nearly 10,000
new customers during the period, leaving it with a net loss of
28,199 current or checking account holders, equivalent to nearly
2 percent of the total.
Britons are often reluctant to move between banks because of
the perceived difficulties involved, although new rules that
guarantee the paperwork will be completed within seven working
days have lifted the number switching.
Britain's seventh-biggest lender reported a pretax loss of
75.8 million pounds compared with a loss of 844.6 million in the
same period the previous year.
Co-op Bank also said its core Tier 1 capital ratio, a key
measure of financial strength, stood at 11.5 percent at the end
of June and was expected to be significantly above the previous
guidance of 10 percent at the end of 2014.
The bank raised an additional 400 million from investors in
May after its Tier 1 ratio slipped to 7.2 percent, dangerously
close to the 7 percent absolute minimum required by Britain's
The bank said it had cut staff numbers by 21 percent - or
about 1,560 workers - in the past year as it looks to slash
costs and Booker said there were more job losses to come.
"A large proportion of our cost is in people and,
consequently, we will continue to see job reductions. There have
been one or two redundancy programmes and I believe there will
be one or two more in that respect," he said.
The bank closed 46 branches, reducing its branch network by
16 percent since the start of the year. Another 25 will close in
the remainder of the year, it said.
An independent review commissioned by the bank, published in
April, concluded that the root of the bank's problems lay in its
2009 takeover of the Britannia Building Society and poor
Booker, who is leading a new management team, said the bank
doesn't expect to make a profit until 2016 at the earliest.
(1 US dollar = 0.6030 British pound)
(Additional reporting by Sarah Young; Editing by Tom Pfeiffer
and David Holmes)