Co-op Bank the star performer despite PPI writedown

The Co-operative’s Financial Services arm saw its operating profits increase by 20% to £131m on the back of a 16.7% increase in income to £718.7m in the 26 weeks to July 2, but a £90m provision set aside to deal with claims against payment protection insurance  policies sold by the bank meant that its pre-tax profits dwindled £5.8m (£44.6m).

The company said that although PPI mis-selling had been “an industry-wide issue”, it pledged that it would ensure that any customers who may have been mis-sold products would be dealt with fairly.

The Co-Operative Bank was responsive for around 60% (£434.6m) of the Financial Services arm’s revenues and the bulk of its operating profits (£108.6m).

The amount of cash deposited with the bank by customers also increased by 5%, with increased contributions from both retail and corporate customers.

CFS said it has doubled the number of corporate banking centres in the past four years to 20, and plans to add another two by the end of 2011.

The bank reported a 73% increase in the number of new current accounts opened to 56,229, which it said was “evidence that it is increasingly being seen as a genuine market alternative”. 

Upgrades to its systems mean that customers of the former Britannia Building Society outlets are now being offered current accounts, and more than 22,000 of those new customers have come from the 245 ex-Britannia branches.

It said that annualised costs savings likely to occur from the merger are likely to be £70m, £21m higher than initially anticipated.

However, impairment charges from its loan book were £3m higher than in 2010 at £47.5m.

Operating profits from the division containing both its business banking division and Platform – a closed book of sel-certified loans inherited from the former Britannia business – dropped to £21.6m (£25.7m).

Claims received by CFS’s insurance arm also increased by 57%, partly due to the fact that it has written much more business but also due to higher claims as a result of the severe weather and an increase in “personal injury claims that still plague the industry”.

CFS’s acting chief executive, Barry Tootell, said: “With confidence in the UK banking sector still weak there remains a clear demand for a serious challenger to the big banks, who will provide more competition and raise the bar in terms of customer service.”