The Co-operative Group has reported an underlying operating loss of £356m for the first half of 2013, compared to a £140m profit for the first six months of 2012. The Group recorded a statutory pre-tax loss of £559m for the period, compared to £18m profit the year before.
During the first half of the year, the Group completed the sale of the last of its car dealerships and motor business under the Co-operative Motor Group, generating £29m of cash for the Group and taking it out of the dealer finance market.
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In total Co-op Bank made a loss of £709m in H1 2013, including writing off £496m of bad debts. The Banking Group (non-core) sector recorded the heaviest loss, losing £375m over the period compared to a loss of £73m in H1 2012.
Core banking activities recorded a loss of £82m, which includes car finance as part of the Group’s unsecured lending business line – personal loans available to retail banking customers for the purpose of buying a car – compared to £78m profit for the half-year in 2012.
The Bank is required by the Prudential Regulatory Authority (PRA) to address its £1.5bn capital shortfall and has begun a Capital Action Plan and strategic review with a four-year turnaround, agreed by the PRA, which will also cover anticipated future losses.
Euan Sutherland, appointed chief executive of the Group in May, said the Group’s priority was instituting a recovery plan for the Bank. Sutherland hoped to bring stability and reduce the cost base at the Bank, which would allow it to "refocus on its key retail and small business customers."
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By GlobalDataNiall Booker, chief executive of the Co-operative Banking Group, said the £496m in loan impairments was "principally the result of a fresh review of non-core assets and partly driven by our developing knowledge and the earlier-than-anticipated disposal of some of those assets."
Despite these disposals, writing down its IT assets by £148.4m and setting aside £61m for PPI payments, the Bank has "continued to lend," said Booker. However, the plan for recapitalisation to be undertaken by the Bank will mean further reduction in its non-core asset portfolio.
richard.brown@timetric.com
