Nearly every UK bank has struggled over the past decade managing the fallout of multibillion pound taxpayer bailouts, business scams or devastating IT meltdowns. But few have faced quite as many scandals, near-failures and turnaround efforts as the Co-operative Bank. During that period the mid-size lender has teetered on collapse, its former chief executive was charged for drug possession, it has been bailed out by a group of hedge funds and it has changed its boss six times in nine years. But the bank, which has its roots in the ethical co-operative movements and was formed in 1872, has survived the fallout of the so-called Crystal Methodist scandal and is now enjoying relative stability under its hedge fund owners, who have seen it to its first profit in a decade. Its newest chief executive, Nick Slape, is insistent that the bank’s 150th anniversary this year will be a turning point. He says it is an opportunity to look beyond recent scandals and spark new excitement over the UK’s “original ethical bank”, which reported on Thursday a £31m profit for 2021 – its first since 2011. The Co-op Bank also more than tripled its bonus pot for bankers to £13.3m after what it described as a “milestone year”. Slape’s team have been rifling through archives to prepare for November’s anniversary. The bank traces its origins to the 1872 establishment of the Co-operative Wholesale Society, the body that would become the Co-operative Group. It was meant to provide financial services to the wider co-operative movement in Britain, in which member-owned businesses worked for the common good. While the bank has since separated from the group, having been taken over by its hedge fund investors as part of a £700m rescue deal in 2017, and no longer counts itself as a member-owned organisation, it has tried to maintain its ethical roots. Although hedge funds and private equity investors are often slated for their focus on maximising profits and short-term gains, Slape is quick to emphasise that the bank’s ethical policies are enshrined in its articles of association, which its shareholders have in effect signed up to. “We take it seriously: with real policies that are approved by the board, and a values and ethics committee that monitors it all, and we report it to the Co-operatives UK,” Slape said, referring to the national industry body that monitors and coordinates on behalf of co-operatives across the country. In 2019, the bank agreed to formally recognise a customer “union” aimed at protecting its ethical policies, which was formed out of the Save Our Bank campaign after the Co-operative Bank’s near collapse in 2013, the year the lender’s financial troubles first came to light. That year, a £1.5bn hole was discovered in its accounts after the disastrous 2009 takeover of the Britannia building society. “That led to its own kind of crisis over the next few years,” Slape said, resulting in the first rescue deal that started the bank’s disentanglement from the larger Co-operative Group. Its troubles were compounded when the bank’s former chair, the ex-Labour councillor and Methodist church minister Paul Flowers, nicknamed the Crystal Methodist, pleaded guilty to possession of cocaine, crystal meth and ketamine in 2014. Slape said Flowers’ charges drove away more customers than the bank’s balance sheet woes ever did. “The only time that they ever really moved away was with the news of the previous chairman that was in the tabloids,” he said. “That clearly played very much on the ethics and the values of the bank. So that’s when my predecessors saw [customer] attrition. Other than that, we’ve got really loyal customers that have stuck with us.” That loyalty was maintained even after the hedge funds took full control nearly five years ago. The group, which includes Silver Point Capital, GoldenTree, Anchorage Capital and Cyrus Capital and the fund manager Invesco, now collectively owns 85% of the bank, with the remainder held by a range of undisclosed institutional investors. Every Co-operative Bank chief executive since has been dogged by questions about when its hedge fund owners will plot an exit. They came close in November 2020, when the New York-based private equity firm Cerberus Capital Management offered about £270m to buy the lender. However, those talks broke down a month later. No further offers have been made and Slape, a former Lloyds, Deutsche Bank and Merrill Lynch banker, is setting his sights on future growth. Having already built up more capital – the​ financial cushion banks must hold to protect them from risky loans and products on their balance sheets – the Co-operative Bank has an opportunity finally to return some cash to its shareholders, or, as Slape puts it, “invest in something”. That could mean buying a loan portfolio or buying another bank to merge with the lender, which on its own has 3.2 million personal customers, 95,000 business clients and 50 branches across the UK. Slape’s team in October tabled a tentative offer, which has since been rejected, for the takeover of the banking rival TSB. But with the Co-operative Bank’s credit rating on the rise – Moody’s upgraded the bank’s unsecured debt rating by two notches last month – Slape says it has further opportunities on the horizon. “We’ve got some big enablers that have been put in place that are allowing us to sort of think about things that we couldn’t think about before, when we weren’t profitable. So all of these things are positive,” he said. Moody’s credited the bank’s upgrade on its “continued progress towards a more sustainable business model” and its improving profitability, but added that the latter could remain “very weak” during the next 12-18 months and that a further downgrade could be possible if profitability proved unsustainable beyond 2021. However, those risks seem unlikely to phase Slape, who is toying with the idea of a stock market flotation that would allow the Co-operative Bank’s longstanding hedge fund investors to exit by 2023. “We’ve got a strong board, we do all our reporting completely consistent of what you do as a public company. So it’s not a big step-change for us,” Slape said. “This is clearly an option.”