The Co-operative Group as a whole reported massive losses for the first half of 2013 due to asset write downs and bad loans within its banking operations.
This though was not unexpected and the Prudential Regulation Authority had already assessed that the bank had a shortfall of Â£1.5 billion and nothing in the Co-op's report has changed the PRA's assessment.
The group lost Â£559 in the first six months of the year, Â£496 million of it in bad loans.
The Co-op Group says that it expects a stronger second half for its food and pharmacy operations in 2013 with better stock and on the back or refurbishing 400 of its stores.
Their banking arm also has a recapitalization plan that has been agreed with the regulators and its drive will be to '….. refocus its strategy around its strength in core relationship banking providing current accounts, residential mortgages and savings products to individuals and small business banking customers'.
Euan Sutherland, Group Chief Executive of The Co-operative Group, said:
“This has been a very difficult first half for The Co-operative Group and the results highlight both the well-documented challenges faced by The Co-operative Bank and the significant work to do at Group level. Importantly, today’s announcement also underlines the need for the Â£1.5bn Capital Action Plan we announced in June to stabilise the Bank, which we reaffirm today and which remains on track."
Niall Booker, Banking Group Chief Executive and Deputy Group Chief Executive, said:
“We recognise the disappointment all stakeholders must feel about the financial performance we are reporting for the half year. This in turn reflects the deep rooted problems that the Bank faces which led to the Â£1.5bn Capital Action Plan announced in June. Today’s results reaffirm that requirement, which covered the losses announced today as well as currently anticipated future impairments."
Following the announcement, a Bank of England spokesperson said:
"The Prudential Regulation Authority (PRA) anticipated the likely scale and source of these losses when it made its assessment of the bank’s capital position in June.Â Consequently, the announcement today does not affect the PRA’s assessment that the Co-operative Bank has a capital shortfall of Â£1.5bn relative to 7% core equity capital after adjustments.
"The PRA will continue to monitor the actions taken by the Co-operative Bank as part of its plan to meet that capital shortfall.Â It will hold the Co-operative Bank to its plans, and if they fall short of what is required, it will ask for additional action."