No Plan B for Co-op Bank as group posts H1 loss of £559m

A £709m first half loss in its troubled banking division pushed The Co-operative Group into the red to the tune of £559m.

The Manchester-based group said it was confident a vital £1.5bn ‘bail-in’ to shore-up the bank’s finances would succeed, but bosses admitted there is “no plan B” for the institution, should bondholders block it.

A prospectus for the Exchange Offer – which includes a £1bn contribution from the Group and will see the Bank listed on the stock market – will be published in October.

Chief executive Euan Sutherland, pictured,  reiterated his mantra that “there are no quick fixes” to the difficulties in the bank, and said his new management team is “grasping the nettle” and trying to address “complex and difficult issues”.

The mutual expects it to take four or five years to heal the bank’s ills – which it says lie mostly with the lending book of Britannia Building Society, with which the Co-op Bank merged with in 2008.

He said: “These results show the scale of the problems in our Bank. The Co-operative Group clearly regards the Bank as a core part of the Group and we are therefore shouldering the burden of the Bank’s recapitalisation with our planned contribution of up to £1bn to the Capital Action Plan.”

Asked about the prospect of job losses in the bank and wider group, Mr Sutherland said it was “inevitable” that some would be at risk as a result of restructuring.

“It is an unfortunate consequence of what we have to do,” he added.

The Bank’s losses in the six months to the end of June comprise £496m  on the impairments on loans, writing down its IT systems by another £148m and setting aside another £61m for compensating customers mis-sold PPI products.

Revenues across the group fell 1% to £5.8bn in the period and net debt was cut £300m to £1.2bn, as a result of improving cash flows and a by the the sale and leaseback of the  new head office, 1 Angel Square.

In the food business sales were down 0.4% at £3.6bn. Like-for-like sales were down 1.1%, and operating profit fell from £119m to of £117.4m in the period.

Sales in the pharmacy division saw modest growth of 0.3% to £379.3m, but operating profits fell from £16.1m to £14.3m as a result of a continued impact of government funding cuts on medicine pricing.

The star performer was the funerals business, which saw sales rise 7.9% to £201.2m and operating profits surge 15.5% to £41.8m.