The Co-operative Financial
Services (CFS), the UK’s second-largest mutual, posted an 85% jump
in pre-tax profits to £402m ($610m) in fiscal 2009, boosted by its
merger with Britannia Building Society and consumers’ lack of trust
in commercial banks.
Group chief executive Peter Marks
said the “record results”, the first since the group’s “historic
merger” with Britannia in August 2009 and the third successive year
of double-digit growth in sales and profit, was driven by
customers’ “flight to trust”.
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The Co-op group saw a 38% uplift in
current account sales in fiscal 2009 at a time when many of its
rivals struggled to keep existing customers, giving it a 4% current
account market share.
The so-called ‘super mutual’ saw the largest jump in
account switchers from the UK’s “Big Four” retail banks. The
numbers switching from Royal Bank of Scotland was up 109% from,
with 101% from Halifax and 92% from Bank of Scotland (prior to the
latter two’s merger) during 2008 to 2009.
According to the bank, reasons for
customers switching current account provider included a desire to
receive better customer service (29%), better online banking (23%),
and access to a local branch (19%).
The Co-op, which now has 4,500 UK
retail outlets and customer deposits of £32.5bn (2008: £11.7bn)
following the merger with Britannia, is hoping to make further
inroads into the mortgage market with the launch of new products
starting with a three-year tracker mortgage.
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By GlobalDataCustomer loans also increased
significantly to £34.1bn, from £10.2bn a year earlier, with credit
card sales also up 11.1%.
It also boasted some of the highest
customer satisfaction ratings. On mortgages, 91% of newly acquired
Britannia customers were likely to recommend Britannia, while the
Co-operative Bank customer satisfaction scores increased to 74.7%,
from 69.6% in 2008.
The case was similar for savings,
with the overall satisfaction among Britannia savers at 80.4% and
87.6% of customers likely to recommend Britannia to other
consumers. The Co-op Bank savings customer satisfaction levels were
at 61.1% at the end of 2009, 5.1% ahead of the sector average.
Marks said: “These are record
results in what has been an historic year for The Co-operative
Group. Our business has continued to thrive in spite of economic
pressure. And, it seems, our business model has never been quite so
relevant!”
He added that the merger created
“one of the world’s most diversified mutual financial institutions”
by offering members and customers “a trusted alternative at a time
when the finance sector has continued to face widespread challenges
and public distrust”.
The bank has launched its biggest
marketing campaign in its corporate history with 65% of its total
estate rebranded and modernised.
The group is now the world’s
largest consumer co-operative spanning core business interests in
the food, financial services, pharmacy and travel industries.
Despite the strong results, the
banking arm of the group, which owns brands such as the online
bank, Smile, recorded a 88.8% fall in net income to £12.2m.
But impairment losses narrowed by
29% to £79.5m and a “good” loan-to-value ratio of 42% was
maintained.
Looking ahead, the bank said its
financial services arm would enjoy the “benefits of greater scale”,
and will pass on more savings and improved products and services to
its members and customers.
Marks was still cautious, however,
and said: “We have to make sure we navigate the still choppy waters
of the recession with prudence. It may be that the UK does not
start to see real economic growth until the end of 2010 or as late
as the beginning of 2011.”
“Sustaining the level of success we
have enjoyed over the last two years will not be easy. All of our
businesses are operating in fiercely competitive markets which will
only get tougher in the year ahead,” he added.
The Co-op group is owned and controlled by its 5m members,
representing an increase of 1.5m from the assimilation of
Britannia’s building society members.
