Record profits as Co-op Bank offers ISAs at the checkout

THE CO-OPERATIVE Bank plans to get closer to its roots and exploit the potential of its retail partners in order to maintain its expansion programme, after posting record profits for the fifth year in succession, Mervyn Pedelty, the bank's chief executive said yesterday.

A further 350 cash dispensers are to be installed in Co-op convenience stores, the bank's new Individual Savings Accounts are available at retail store checkouts and plans are afoot to market new products with the Co-op's travel agencies. The bank is also poised to re-enter the mortgage lending market for the first time since its small existing mortgage book was sold off in 1992.

The Co-op's profits before tax rose 34 per cent to pounds 73.6m in the year to 9 January 1999, up from pounds 55m last year. The rise was helped by a combination of sharply increased lending and deposits, an increase in the margin between deposit and lending rates and tight controls on costs.

Operating income grew by 12 per cent. Fee income rose by less than 6 per cent but average customer lending rose by 10 per cent, average deposits grew by 14 per cent, net interest income rose by 15 per cent and the margin between deposit costs and lending returns rose from 4.5 per cent to 4.7 per cent, helped by the rise in average interest rates.

The Co-op's bad debt provisions went up from pounds 25m to pounds 41.6m, increasing from 1.1 per cent to 1.9 per cent of the loan book, but this reflected the controlled growth of higher margin unsecured personal lending, Mr Pedelty said. Operating costs rose by under 2 per cent and staffing levels actually fell slightly, although there were no redundancies.

The bank's reserve ratios edged higher and its market share rose, with 20,000 people joining its Internet banking service in the last year, although the bank still has little more than 2 per cent of the UK market.

Last year's growth rates are unlikely to be maintained as the economy slows, but the current year has started strongly.