Nervy savers quit Co-op Bank after its sale flops

Savers pulled £400 million in deposits out of the struggling Co-operative Bank as the business sought to shore up its creaking finances in the first half of the year.

The bank, which put itself up for sale but failed to find a buyer, eventually secured a £700 million rescue from its US hedge fund investors which cut the Co-op Group’s stake in the bank to just 1%.

Today’s results showed its customers pulled £400 million out of instant access savings accounts while deposits were lower because of “customer reaction to the bank’s announcements of its sale and capital raise processes”.

The Co-op claimed strong demand for fixed-rate savings and ISA products, but the number of current accounts dropped by about 25,000.

Overall, deposits fell from £22.4 billion to £20.9 billion — a drop of £1.5 billion — during the first half as the institutions also moved ahead with plans to cut corporate deposits by withdrawing fixed-rate products and cutting interest rates, alongside the fall in retail deposits.

The bank’s losses fell slightly from £177 million to £135.2 million, but its net interest margin — the difference between what it pays on savings and takes on loans — was squeezed to 1.32%, which the Bank put down to factors like tougher competition in the mortgage market.

Chief executive Liam Coleman said the business had been “resilient”, adding: “I am confident that we can continue to build on this momentum.”