Not only this, but off the back of the bank's results for the first six months of the year, where it has reported a loss, chief executive Niall Booker said that the bank will not make a profit until 2017.
It reported pre-tax losses for the first six months of year of £204.2 million, compared with losses of £77 million a year earlier.
The Co-operative Bank is partway through a significant turnaround strategy after it almost collapsed back in 2013, after it was revealed that it had a £1.5 billion black hole in its books.
The bank had been fully owned by the 150-year old Co-operative Group up until this point, but following its financial difficulties, it had to seek investment from hedge funds to prop it up. The Co-operative Group now only owns a 20% stake in the bank.
Chief executive Brooker commented on the results by saying:
Over the first half of 2015 the management team has continued to make real progress towards turning the Bank around. Our work to improve resilience, to bring aspects of our business back within our risk appetite and to reduce costs is on course, and we are encouraged by the headway we have made in this period.
I would like to thank colleagues for their considerable dedication and perseverance as we reshape the business around our individual and small business customers.
As we have said before, the financial performance of the business will remain dominated by legacy issues for some time. However, this should not diminish the progress made against our strategic plan.
The bank's IT problems feature heavily throughout the results documents and presentations to investors. So it seems that when the Government Digital Service's current director, Mike Bracken, takes up his new post as CDO for the Co-operative Group, he will have a significant challenge on his hands with the bank.
The Co-operative said that delivering a frictionless banking service to its customers that allows them to bank where and when they choose is central to its strategy moving forward. It said that its aim is to provide branches where it knows they are being well-used, whilst in parallel developing strong digital channels.
The bank highlighted that its recent investments have led to over 700,000 customers now actively using online and mobile banking, with over 213,000 having switched to paperless statements.
In a presentation to investors, the Co-operative highlighted the following digital improvements made in 2015 and also outlined some of what to expect in 2016:
However, huge IT problems remain. The bank said:
The Bank’s IT system has been underinvested for a considerable period of time. The Bank needs to urgently and significantly improve and re-engineer its existing IT platform as the existing infrastructure is unsuitable and inherently fragile. There are also concerns about its resilience as the Bank’s IT disaster recovery plan is not proven end to end.
“The transformation of the Bank remains challenging and work in progress. We remain focused on achieving capital, IT and operational resilience. We have made good progress and become more resilient every day but this will remain a continued focus for the management team for some time.
To overcome this, the Co-operative Bank entered in an Enterprise Services agreement with IBM in January of this year to migrate its IT infrastructure over to an IBM platform, which is expected to give the bank the disaster recovery capabilities it requires to comply with the Financial Conduct Authority's (FCA) thresholds.
The FCA is monitoring the situation closely and it has been confirmed that it has the right to intervene and take action in the future, if it feels that progress isn't being made. The bank said:
There are considerable execution risks in a project of this scale and complexity, including the risk that costs may exceed those originally contemplated. The Bank’s regulators are fully aware of the steps the Bank is taking to address these operational risks.
The fact that the Co-operative Bank doesn't have a disaster recovery plan in place to recover from a significant failure is extremely concerning. It's good that the bank is taking the measures to rectify this, but as has been highlighted, these projects also carry a high amount of risk and there are plenty of things that can go wrong.
Only once these systems are stable will we be able to assess the likelihood of a successful digital future for the bank.
However, its good that it recognises that digital needs to be at the top if its agenda if it is to have a profitable future and become an organisation that meets the needs of its customers.