No done deal on Lloyds as LFL sales drop at the Co-op

Mutual giant, the Co-operative Group, says like-for-like (LFL) food sales are recovering as it mulls a possible offer for a network of Lloyds bank branches.

The company's food division, operating in an "increasingly tough" market, produced an underlying operating profit of £309m in 2011 versus £389m in 2010.

LFL sales steadily improved during the year, from -3.6% at the half year to -0.4% in the second half, making the full year -2.1% and Thursday's update says the trend has continued to improve in 2012.

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The banking division turned in an underlying operating profit of £201m (2010: £202m); with a core tier one ratio of 9.6% and an improved loan to deposit ratio of 94%.

The group's other specialist businesses contributed operating profit of £99m (2010: £90m).

Although the Co-op has been named the preferred bidder for a network of 632 Lloyds branches the Co-op's Chief Executive, Peter Marks, said: "This is a complex deal and there is no certainty we will reach a final deal."

The Co-op also says it will begin to offer legal services through its current bank branches.

Overall operating profit rose 0.5% on 2010 to hit £585m while profit before tax dropped 5.8% to £373m.

The dividend has been decreased to 1.75p per point from 2p in 2010.

BS