The Co-operative Bank has renewed its mortgage servicing contract with Capita, handing the controversial outsourcer £141m over six years.
Capita's existing contract with the Bank for its mortgage servicing operation was signed in August 2015 for £325m and was originally due to end in 2025. However, Capita faced potential litigation from Co-Op Bank due to alleged failings regarding the servicing contract in 2016.
Those differences were resolved in 2017 and an amended five-year contract drawn up, saving 740 jobs. Capita continued to provide mortgage administration services and new mortgage application processing. The existing IT systems remained in place, but the proposed transformation ceased. That contract expires next year.
The scope of the renewed contract includes Capita continuing to run a full range of mortgage services – from initial enquiry and application, all the way through to mortgage maturity.
Capita will also be working alongside a third party implementing a new IT platform for the bank, it said in a statement.
Last year financial regulator Prudential Regulation Authority opened a review into how the bank was regulated between 2008 and 2013, before a £1.5bn capital hole emerged in its books as a result of bad loans. Part of that review will examine the impact of IT on its operations.
Following its collapse in 2013, part of the turnaround efforts for Co-op included throwing £500m at overhauling its creaking IT infrastructure after years of "underinvestment".
Speaking about the contract renewal today, Andrew Bester, chief exec of the Co-operative Bank, said: "Our mortgage business continues to thrive and is central to our future plans for The Co-operative Bank. The service Capita provides our customers is a key element of our success in a competitive market, and we are delighted to be renewing our partnership."
Jon Lewis, chief exec of Capita, said of the renewal: "This is testament to a new Capita, which is working more collaboratively with its clients, and is strongly aligned to the Bank’s values as a responsible business."
The deal follows recent contract renewals for Capita with the National Trust for £46m and London Borough of Bexley for £32m.
Capita is in the second year of a turnaround programme led by Lewis, who previosuly blasted his company for being "too complex" and "driven by a short-term focus". In its half-year results for 2019, Capita reported a fall in revenue of 6.3 per cent to £1.85bn and a drop in profit before tax of 3.6 per cent to £31.2m. ®