"Our safe lending book provides resilience in what is a challenging retail banking market and an ongoing uncertain political and economic backdrop."
The Bank cited "sustained pressure on mortgage margins" and a "challenging external environment" in its half year results, reporting a statutory loss before tax of £38.5m compared to £39.5m in H1 2018.
New mortgage completions fell from £2.1bn in H1 2018 to £1.7bn while net residential lending dipped from £0.5bn to £0.4bn.
The Bank says it has seen a reduction in customer net interest margin to 1.83% from 2.08% in H1 2018 "due to reductions in mortgage margins as new business pricing remains competitive".
It believes the met interest margin will reduce further in 2019 due to sustained pressure on mortgage margins.
Andrew Bester, CEO of Co-operative Bank, said: “We’ve delivered a positive first half financial performance that is ahead of expectations, and although loss-making overall, is near break-even on an underlying basis.
"We have seen margin headwinds this year so far, but our safe lending book provides resilience in what is a challenging retail banking market and an ongoing uncertain political and economic backdrop. Overall, our business has proved resilient, and as a result we have upgraded our expectations in relation to our CET1 and cost:income ratios for the remainder of the year.
“We are making good progress against our transformation strategy, including investing in our digital capability, the separation of our IT systems from the Co-operative Group and commencing our mortgage and savings re-platforming. The successful issuance of £200m Tier 2 debt in April, with strong support from our investor base was a significant step towards delivering our commitment to achieve MREL compliance within the industry-wide timelines."
