The Co-operative Bank warned that the economic impact of the Brexit vote was a threat to its recovery plans as the troubled lender revealed a narrowed first-half loss of £177m.

The bank said the uncertain economic backdrop was depleting its capital reserves – a key cushion against financial instability. It warned that the potential for higher unemployment and falling house prices in the aftermath of the EU referendum could also damage its prospects.

Losses before tax narrowed in the first half of the year to £177m from £204m in the same period last year, but the bank’s chief executive, Niall Booker, warned it was still facing considerable challenges.

“Addressing the bank’s historic legacy issues will continue to impact our overall financial performance until the end of our plan period. While losses have reduced year on year, the potential for headwinds in the economy as a whole presents further challenges,” he said.

Booker said all high street lenders faced a challenge from the referendum’s consequences, including the Bank of England’s decision to cut interest rates to 0.25%, which makes it harder for banks to generate profits.

“Today’s market conditions are challenging for all retail-focused banks and the macroeconomic uncertainty following the result of the EU referendum, including the likelihood of lower for longer interest rates, may restrict our ability to grow revenue in the short term,” he said.

The bank is midway through a five-year turnaround plan and has been cutting jobs in an effort to lower costs.

It closed 54 bank branches in the first half of 2016 as customers increasingly prefer to do transactions online or by telephone. A further five closures are planned during the second half of the year, leaving the Co-op Bank with 105 branches.

It nearly collapsed in 2013 after losses from bad debts on commercial property opened up a £1.5bn hole in its finances. Bondholders took control of the bank, turning its longstanding owner, the Co-operative Group, into a minority shareholder. Its financial woes were compounded by revelations that its former chairman, Paul Flowers, took class A drugs.

The bank’s core tier one ratio – the main measure of the cushion of capital that a bank holds – fell to 13.4% at the end of June from 15.5% at the end of 2015 as losses eroded its capital pile.

Losses in the first half were lessened by a one-off £58m gain from the sale of the bank’s share in Visa Europe.

The Co-operative Group is still the largest shareholder in the bank, with a 20% stake. Its biggest institutional investors are the US hedge funds Silver Point Capital, GoldenTree Asset Management, and Perry Capital.

The group has taken up its right to appoint a non-executive to the bank’s board, with Alistair Asher taking on the role from 12 September.

The bank confirmed that its deputy chief executive, Liam Coleman, would replace Booker in the top job at the end of year.

Dennis Holt, the bank’s chairman, said: “Following the appointment of Liam Coleman as deputy chief executive on 3 May 2016, I am pleased to confirm that Liam will succeed Niall Booker as chief executive, subject to regulatory approval, when Niall’s contract with the bank expires on 31 December 2016 following a planned handover during the fourth quarter of 2016.”

The number of current accounts held at the bank fell to 1.422m at the end of June, from 1.43m a year earlier.

Booker said that although the economic outlook was more uncertain following the vote to leave the EU, there had been no noticeable drop in the number of people applying for a mortgage.

He said it was impossible to put a number on what the Brexit vote might mean for the future profitability of the bank because it was “still too murky”.