A rising tide of credit card debt hit Co-operative Financial
Services today after it reported a 16% slump in profits
at its banking arm for last year. The slowdown at the Co-operative
Bank offset a much improved performance from insurance business
CIS, which doubled profits to £37.1m after a modernisation
drive announced in the summer of 2004.
Overall, CFS profits rose 3.8% to £135.7m in the year
to January 14, as it presented integrated results for its
banking and insurance operations for the first time.
CFS chief executive David Anderson said the turnaround
at CIS exceeded expectations, but that improved income
at the Co-operative Bank had been more than offset by
the increase in charges to cover bad debts. The Co-op
has a strategy of investing in companies involved in fair
trade or social enterprise and avoiding groups such as
tobacco firms, companies which damage the environment
and those which supply arms to oppressive regimes.
The figure of £99.8m compared with £70.7m
in 2004 and was driven by repayment difficulties in the
credit card sector. As a result profits at the bank division,
which includes internet operation Smile, fell to £96.5m.
The Co-op said the increase in charges had been in line
with others in the sector and that it maintained strong
controls over lending through credit scoring systems and
monitoring of overall indebtedness.
During the year CFS integrated its two divisions to
give its seven million customers the support of a single
financial services business. As part of restructuring
of CIS, service calls were migrated from back office areas
to a customer contact centre and staff trained to deal
with enquiries across a much broader range of products.
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