Co-op takes hit from bad loans and write-down on IT systems

 
Tim Wallace
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THE CO-OPERATIVE reported falling profits in 2012 as weak retail sales and growing bank losses dragged on performance, the group’s full-year results showed yesterday.

Underlying operating profits came in at £431m, a 17.5 per cent fall on the year. Food sales fell 0.7 per cent on a like for like basis over the year, dragging underlying operating profits down 9.4 per cent from £318m to £288m.

The banking arm swung to a statutory loss of £674m, in part due to a £150m hike in the lender’s compensation bill for mis-selling.

Its bad loan losses soared to £474m, almost three-times the £121m recorded in 2011.

The group is selling its insurance arm in part to raise funds for the £750m purchase of 623 Lloyds bank branches – a forced sale that is expected to be complete by the autumn.

It is thought the sale could raise £600m, while the group is also selling its life and savings arm.

But the mutual’s chief executive Peter Marks insisted the bank had sufficient capital even without the units’ sales.

“These moves are in line with our strategy of focusing on our relationship banking activities and will also strengthen our capital position,” he said.

“The bank’s underlying financial strength remains solid, with a pro forma core tier one ratio of 9.2 per cent and strong liquidity levels.”