The banking arm of the Cooperative Group has announced a statutory loss of £662 million for the full year of 2012, compared to a profit of £138 million in 2011.
Further write downs from payment protection insurance (PPI) compensation coupled with underperforming non-prime mortgages in its non-core business ensured the non-core business declared an operating loss of £377 million, compared to £3m profit in 2011.
Non-prime residential mortgages – responsible for a chunk of the loss announced today – were sold by Britannia Building Society through its Platform Home Loans brand prior to the Co-op merging with Britannia in 2009.
Peter Marks, group chief executive of the Cooperative Group, said the business has now clearly identified what the core business units will be in the future and have taken ‘firm action’ on no-core assets to improve performance and manage risk.
He said: “In addition, we are today announcing the Banking Group’s intention to sell its general insurance business. This follows the signing earlier this week of a binding agreement to sell our life and savings business.”
The total cost of customer compensation for mis-sold PPI now stands at £244 million.
In the announcement, the Cooperative Banking Group said its core business would now focus on activities in retail, corporate, business banking and treasury services.
However, the core business operating profit was also down year on year, with £120 million declared for 2012, down from £173 million in 2011.
Peter Marks moved to reassure members, saying that the bank’s underlying financial strength remained solid, however.
He added: “We are not complacent about our financial strength and our strategic focus is on implementing a range of measures targeted at increasing the health of our capital ratios.
“These include strengthening the management team and the appointment of advisers to support implementation of a range of capital strengthening and cost reduction options.”
The Co-operative Banking Group is set to acquire 632 Lloyds Banking Group branches – under the terms of “Project Verde”. It is anticipated that these branches will be rebranded when the group will also completely dispose of the Britannia Building Society brand.
The Co-operative Banking Group includes retail brands Smile and Co-operative Investments.