Operating profit at UK-based Cooperative Bank
(Coop) has slumped by 90% year-on-year to £11.3m  ($17.9m) for
the six months to 30 June (H111 £108.6m).

The retail banking unit of the Coop (including
the Coop, Britannia and smile brands) outperformed other units
within the group: retail banking profit fell by 44% year-on-year to
£32m (H111 £57.8m).

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First half highlights for the Coop
included:

  • Stable core tier 1 ratio of 9.6% (unchanged from June 2011 and
    December 2011);
  • Customer numbers growth: successful account switching
    initiatives boosted an increase in primary current account numbers
    by 3.3% in the first half of 2012; In the first six months of the
    year, 5% more customers switched to the Coop from their compared
    with the same point last year;
  • The retail mortgage book performed well and arrears reduced
    during the first half with late mortgage arrears (>2.5% of
    balance) down from 1.18% at December 2011 to 1.03% at June
    2012;
  • High levels of customer advocacy, 9.3% above the average of its
    top five competitors;
  • The launch in June of the bank’s first mobile banking
    application;
  • The Coop remains well funded with a loan-deposit ratio broadly
    in balance at 101%;
  • Impairment losses were broadly flat year on year, and
  • Reaching agreement to acquire the 632 branches being sold by
    Lloyds Banking Group.

Less negative metrics included a near-doubling
in first half bad-debt charges to £91.9m (H111 £46.1m), due
principally to charges on the Coop’s non-core corporate loan
portfolio.

Retail banking net-interest income fell by
£14.8m at the half year while non-interest income also fell
compared with last year.

The Coop was suffered a £40m hit relating to
further provisions for the mis-selling of PPI and incurred an
additional £20m of transaction costs relating to the Lloyds’
branches acquisition.

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Looking ahead, the Coop warned that impairment
pressures are unlikely to significantly abate in the short
term.