Co-op profits plunge as bank suffers

The Co-Operative Group saw profits cut in half as its bank and food divisions felt the full force of the economic downturn.

In the first six months of 2012 the company said profits were down to £69m, compared with £155m the year before, while overall sales were up 0.2% to £6.6bn.

Its banking arm made a loss if of £58.6m, after a charge of £40m for payment protection insurance mis-selling and a £20m bill for its successful bid to buy more than 600 branches from Lloyds.

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It was also hit by increased impairments on lending to corporate customers, with bad debt charges rising to £91.9m from £46.1m.

The firm blamed continued uncertainty in the Eurozone, prolonged low interest rates and the resulting impact on profits, together with higher unemployment for much of its woes.

Its food business saw sales drop 2.2% overall and by 1.2% on a like-for-like basis, which Co-op put down to the on-going tough market, the sale of non-core assets and bad weather hitting convenience operators.

Operating profit for the food business was £119.0m, down 16.4% on last year.

The good news came from the company's 'specialist businesses', which continued to perform well, most notably within pharmacy and funerals.

Revenue was up 1.5% at £777.1m and underlying operating profit jumped 19.3% to £62.0m.

Chief Executive Peter Marks said he expected an improvement in sales and profit in the second half.

"The environment is tough and we see no let-up in that," he said.

"But we believe that the work we have done over the past five years to scale up in our core businesses means we are better placed than ever before to thrive when the economic upturn does come."