UK-based ethical lender Cooperative Bank has posted an earnings update with pre-tax profits for the first three quarters of £81.1m (2022 Q1-Q3: £102.8m).

Highlights for the year to date include a 23-basis point rise in the net interest margin to 1.82%. This results in a 10.4% rise in net interest income to £363.4m. On the other hand, operating expenses rise by 17%. This is driven mainly by strategic investment in the bank’s mortgage and savings transformation programme. Completion of key projects such as Capita mortgage insourcing saw around 400 employees join the bank in the first half of the year.

The rise in expenses is reflected in the cost: income ratio rising from 72.2% a year ago to 79.7%.

Nick Slape, CEO, Cooperative Bank said: “I am pleased to announce our profit before tax of £81.1m, with an underlying profit of £97.9m and statutory return on tangible equity of 12.3%. We continue to manage credit quality effectively, with a stable NIM and strong deposit franchise. In the quarter, we acquired Sainsbury’s mortgage portfolio comprised of approximately 3,500 customers and c.£0.5bn of balances. This is our first portfolio acquisition in more than a decade. It highlights the bank’s turnaround and focus on both organic and inorganic opportunities.

“Our mortgage and savings transformation programme continues at pace. Mortgage originations are now live on a new re-branded platform, “The Co-operative Bank for intermediaries”, as we start to see the benefits of our accelerated investment. We have strong levels of capital and liquidity, with full year guidance unchanged across all key indicators.”

Cooperative Bank bid rumours

In a note accompanying the results, the bank said: “Following the bank’s strong recovery and growth in the past three years, the bank is exploring potential strategic opportunities, the assessment of which is currently at a preliminary stage. There is no guarantee that such discussions will result in any eventual transaction.”

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The bank is understood to be evaluating a possible sale and was linked with an approach from Aldermore. Reports suggest such a bid is now off the table. Another possible bidder, Shawbrook, continues to be linked with a potential takeover.