Co-operative Group sells off bank stake as profits tumble
The Co-operative Group has revealed it sold off its final 1 per cent stake in the troubled Co-op Bank as it posted a sharp fall in profits after bumper payouts to members.
The food-to-funerals mutual had been left with just 1 per cent after a £700 million rescue deal to get the Co-op Bank back on track completed weeks ago, but confirmed it has sold the last remaining stake for around £5 million to an existing shareholder in the last few days.
Details of the stake sale came as the Co-op Group posted a 48 per cent fall in underlying pre-tax profits to £14 million for the six months to July 1 after shelling out £29 million in member rewards, £6 million to good causes and after losses at its insurance arm.
On a bottom-line basis, profits rose 47 per cent to £25 million.
The figures come weeks after Co-op Group emerged as the front-runner to buy convenience store operator Nisa for a deal in the region of £140 million.
Steve Murrells, group chief executive of the Co-op, remained tight-lipped on the progress of the discussions, but said they "could potentially lead to an offer being put to the members".
He said a Nisa buyout would "play to its core strengths", as the group's "roots are firmly in wholesale".
He said the sale of the stake in the Co-op Bank was a "logical" move.
"At 1 per cent, we would have had no influence in that business, and in selling to an existing shareholder, it now gives us the opportunity to focus on our core business. That felt the right and logical thing to do," he said.
The refinancing deal struck between the Co-op Bank and its hedge funds had already spelled the end of the historic relationship between the mutual and the lender, with the formal agreement ending in 2020.
But the bank - which nearly collapsed in 2013 after the discovery of a £1.5 billion black hole in its finances - is keeping the Co-op branding.
Mr Murrells said it was not up to the mutual to rule on this, adding the bank will need to meet articles of usage, monitored by independent bodies.
In its half-year results, the Co-op Group hailed its 14th quarter in a row of rising sales at Co-op Food, with like-for-like growth of 3.5 per cent in its first half.
Convenience store like-for-like sales rose 4.5 per cent, which the group said was boosted by its recently revamped membership reward scheme.
It said underlying operating profits from the food business jumped 3 per cent to £65 million and 22 per cent higher on a reported basis.
The group has signed up more than 1.1 million people as members since relaunching its reward scheme a year ago, taking the total to 4.5 million.
The results showed its insurance business swung to an underlying operating loss of £1 million against profits of £11 million a year earlier as it increased reinsurance through third parties.
On a reported basis, the division saw operating losses widen to £11 million from £4 million a year ago.
Mr Murrells said the group "continued to perform in the face of challenging markets".