Known as the 'people's bank' for its historic link with the co-operative wholesale movement, the bank announced last June that it would not do business with organisations involved in unethical enterprises. Its blacklist included companies involved in bloodsports, producing tobacco, testing cosmetics on animals, intensive factory farming and the fur industry.
The higher moral ground seems to have appealed to Co-op's target market, the well-heeled ABC1s: its customer deposit base jumped by 13 per cent during 1992, compared to the normal annual increase of between 4 and 5 per cent. Applications for Co-op Bank's Gold Card flooded in immediately after the announcement.
The commercially risky move lost the bank only 25 personal and business customers to its knowledge. Those who told Co-op why they were leaving included factory farming businesses and the masters of local hunts.
Yesterday, the bank reported pre- tax profits of pounds 9.8m for the year to 9 January, a sharp improvement in performance from the previous year's loss of pounds 5.9m. Bad debt provisions declined by about pounds 5m to pounds 42.8m as 1,000 of the bank's 80,000 small and medium-sized business customers went bankrupt.
Terry Thomas, the bank's managing director, said the decision to boycott unethical businesses offended certain industries. Chemicals and cosmetics industry trade associations unsuccessfully took the bank to court over the matter last year.
The bank also took a similar moral stand in its currency dealings. On Black Wednesday, when the pound fell dramatically, its dealers closed their trading positions as a matter of principle.
'We refused to speculate against the pound, using customers' money at the expense of the British taxpayer,' Mr Thomas said. Co-op's profits on its normal foreign exchange trading activities in 1992 were pounds 450,000 in 1992.
'Our stand on foreign exchange dealing and our other ethical and moral principles have been rewarded by an increase in the customer base,' he added. The bank has now about 1.5 million personal customers.
Co-op's free-for-life Gold Card, launched just 18 months ago, has stunned competitors by becoming what is believed to be the most successful gold card offered by any UK bank. Co-op now has 173,000 gold customers, despite turning down 25,000 applicants amid criticism of its tough credit scoring system. It is making a profit on the business.Reuse content