The successful closure of this second transaction means the Bank has now securitised almost half of the Optimum portfolio (£3.14bn) within the last six months.
The sale of the Optimum portfolio, which is particularly susceptible to severe economic stresses, is a key component of the Bank's plan to increase its capital resilience. The initial £1.5bn securitisation of the noncore Optimum residential mortgages portfolio in May 2015 contributed significantly to the Bank’s improved CET1 ratio which stood at 14.9% as at June 30, 2015 (from 13.0% as at December 31, 2014).
Co-operative was the only bank to fail a series of stress tests from the Bank of England last year. It has since announced a recovery plan to reduce its risk weighted assets, particularly historic residential mortgages inherited as part of the Britannia acquisition in 2009.
Co-op has estimated a reduction in 'risky' assets by approximately £5.5bn by the end of 2018.
Niall Booker, Chief Executive Officer, said:
"The successful completion of this transaction further demonstrates the steady and real progress we are making in meeting our commitments by delivering our plan to reduce our risk weighted assets to build the Bank’s capital resilience under stress. There is, of course, further work ahead to de-risk the Bank but we are pleased to have successfully securitised almost half of the Optimum portfolio since accelerating our plan to reduce RWAs, particularly given the capital market headwinds in this period.
"The reduction in non-core assets is a key part of the turnaround plan, not only in de-risking the Bank but also in enabling the creation of an economically viable standalone bank, distinguished by our adherence to values and ethics. Future deleveraging may, of course, be subject to some level of market risk but we remain on track to reduce total RWAs in line with our plan.”
