Co-op feels the pain of banking writedown costs with £600m loss
The Co-operative Group’s outgoing chief executive has unveiled a calamitous loss of nearly £600 million after it was forced to write down the value of certain banking operations and set aside compensation for payment protection insurance claims.
Peter Marks described last year as “challenging” and remained downbeat about the prospects for the consumer economy, although he hailed a return to positive sales growth at its near-3000-store grocery business in the final quarter.
The mutual society’s overall performance was hit by impairment charges totalling £650 million, including £474.1 million worth of write downs on the value of its “riskier” lending operations — notably on sub-prime mortgages — from its acquisition of Britannia Building Society in 2009, and on IT systems largely related to its intended acquisition of 632 branches from Lloyds, which it still “hopes” to complete. The Co-op has also set aside £149.7 million for customers mis-sold payment protection insurance.
Marks, who steps down in May, pulled no punches by saying: “Our bank is not immune to the dreadful problems that have undermined the banking sector.”
But he added: “We are clearing the decks and getting in shape for the future. We have a very well capitalised bank and our core banking business made £120 million [operating profit] last year.”
The Co-op suffered a statutory loss of £599 million over the 53 weeks to January 5, on revenues up by £200 million to £13.5 billion.
The group is also selling its general insurance business, which is in addition to the sale of its life insurance operation to Royal London Mutual for £219 million.
The Co-op’s grocery business, which has 2800
shops, saw its profits fall by 9% to £288 million last year, dragged down
by falling sales in its first half. But underlying sales rose by 0.3% in its
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