CFS half year results
On the 11th September we announced our interim results which show that CFS has, to a far greater extent than the majority of our competitors, weathered the current storm in the financial markets. We’ve continued to do this in a sustainable manner, (as our investments are all in line with our customer-led ethical policy - a first, and unique, amongst UK high street banks. )
Financial Highlights
- Total shareholder profit before tax, significant items and short-term investment fluctuations was £73.4m (2007: £38.0m) an increase of £35.4m.
Key points:
- £46.2m profit from Banking activities (2007: £45.5m),
- £1.5m technical loss from General Insurance (2007: £33.3m loss) an improvement of £31.8m from 2007 which was affected by exceptional weather
- Bank net revenue increased by £15.7m with an increase in net interest income of £13.3m and an increase of £2.4m in non-interest income.
- Bad debts fell to £45.3m (2007: £53.2m).
- General Insurance claims ratio fell by 19.5% to 74% (2007: 93.5%). (Long-term business in Life and Savings is transacted on a mutual basis with all profits retained for the benefit of policyholders)
David Anderson, our Chief Exec said: “These results reflect a very solid performance in what is currently a tough market. Whilst we aren’t immune from the economic consequences of the credit crunch we strongly believe that by demonstrating that building your business on strong ethical principles and by delivering evidence of clear ethics in action, such as our involvement in microfinance, we will continue building on the trust and responsibility associated with The Co-operative brand”.
The Bank’s ethical policy is being renewed this year - if you want to be involved in the vote, you can get more information here.
September 24th, 2008 at 1:00 pm
Can the bank’s management tell us if they are involved in any way in the securitisation of loans and mortgages issued by the Co-op Bank?
September 24th, 2008 at 1:19 pm
Hi Bob - Rob here from CFS,
Thanks for your message - I’m not the right person to answer your question, but give me a few days and I’ll direct it accordingly.
Rob
September 30th, 2008 at 4:55 pm
I am just wondering (excuse my ignorance here) but if this is a “co-operative” bank, how come there are shareholders?
I thought that the principle of a co-operative was that is was owned by members and there were no shareholders. (This is true of the Co-op shops)
I’d be interested to know about this. Especially as the current financial woes the world over seem to be caused by shareholder greed. Is the co-operative bank in a better position to weather the current crisis? (I am asking this question as a concerned account holder)
October 1st, 2008 at 1:08 pm
Hi Mary - Rob here from CFS. In answer to your questions:
“I am just wondering (excuse my ignorance here) but if this is a “co-operative” bank, how come there are shareholders?
I thought that the principle of a co-operative was that is was owned by members and there were no shareholders. (This is true of the Co-op shops)”
The Co-operative Bank has one shareholder only and that is its parent company The Co-operative Group which in itself is owned by its members (this is the ’shops’ bit you mention), so effectively The Co-operative Bank forms part of the wider mutual organisation of The Co-op and does not have any shareholders unlike its plc counterparts.
“I’d be interested to know about this. Especially as the current financial woes the world over seem to be caused by shareholder greed. Is the co-operative bank in a better position to weather the current crisis? (I am asking this question as a concerned account holder)”
Given the current economic climate being a mutual as opposed to a plc clearly puts The Co-operative Bank in a much stronger position both in terms of its business model and its funding position.
David Anderson, Chief Executive of The Co-operative Financial Services recently commented:
“The Co-operative Financial Services interim results (announced 11th September) demonstrate the strength of our balance sheet and the responsible approach we’ve taken in managing our customer’s finances, which has limited our exposure to the market forces that are causing so many of our competitors concerns. The UK media has seen The Co-operative Financial Services as a business ‘weathering the storm’ better than most, which can only help to build consumer confidence in the brand in these uncertain times. Clearly we are not immune from the turbulence within our marketplace, but the fact that we are continuing to move forwards with our growth and investment plans reflects the underlying strength of our business”.
Hope this answers your question!
Bob: I haven’t forgotten about you - I just don’t know enough about that subject to answer your question. I’m chasing the people who do for a good answer for you - sorry for the wait.
October 6th, 2008 at 9:48 am
Hi - Rob here again. Bob - hopefully the below will answer your question, sorry it took me so long to get back to you.
“We have a strong liquidity position given that we currently receive more in deposits than we lend to customers. Unlike other providers, we are not therefore reliant on the wholesale money markets for funding. We do maintain both borrowings and deposits from the wholesale markets however this at relatively low levels and is to ensure we maintain a market presence. At present all our loans are funded by liabilities (deposits) and this is a position we expect to maintain until markets stabilise fully.
The Bank has set up a £3.0 billion Covered Bond Programme to diversify its sources of funding for future growth. In the current market conditions, the Bank maintains a very high retail funding ratio to ensure it is not reliant on wholesale markets.
As extra protection against any unforeseen events in a very volatile market (and as a contingency only), the Bank has ensured it can access the SLS (Special Liquidity Scheme) at any time.
The current plan is minimal access to the SLS sufficient to keep the facility access alive, as the Bank has no need for additional liquidity either now or in the foreseeable future.
By putting in place a covered bond programme and access to the SLS we are strengthening our financial framework, re-enforcing our prudent approach to the management of our balance sheet and ensuring we can continue with our expansion plans, despite the credit crunch.”
October 11th, 2008 at 2:24 am
I was very pleased to see the Co-op Bank setting up such a site, and to read the statements arising from Bob Wallum’s original question.
Our life savings are deposited with the Co-op Bank in Guernsey, so we were particularly pleased to read the recent statement by David Anderson, and to hear him being interviewed on Radio 4’s World at One this week. It does appear that the Co-op Bank is better able to weather the current storms than most.
However, I am concerned that such deposits in Guernsey are outside of the Financial Compensation arrangements that provide some guarantees on deposits in the UK. Can you tell me whether or not there is a similar protection scheme in the Channel Islands for deposits made? Presumably such deposits are indemnified by the parent company of the Co-operative Bank in Guernsey, Co-operative Financial Services PLC?
Thank You
October 13th, 2008 at 4:02 pm
Bill,
Many thanks for your interesting post let me field your question to a colleague and I will come back to you with the answer!
Thanks
Sarah
October 15th, 2008 at 5:10 pm
Hi Bill - Sarah here from CFS.
We are currently awaiting clarification from the Financial Services Compensation Scheme on whether the protection limits extend to accounts held in Guernsey. We expect a response shortly and will update you as soon as we have an answer.
October 17th, 2008 at 2:27 am
Thank you very much, Sarah. I am most impressed by this blog and the ability to communicate directly with people from CFS. It has been extremely reassuring to discover that the Co-operative Bank is holding up well in the midst of all this uncertainty, and that they are not as immersed in the problem areas as some of the other high st banks. Thanks for giving me this information - we will decide what to do when you are able to give an answer
Yours
Bill
October 18th, 2008 at 3:06 pm
Hello I would like to mirror Bill’s comments I am also very impressed with this interaction that I can have direct with CFS.
My question is with the media attention last week around the potential joint venture with the Britannia do you think this bill will get passed and will this be the future for building societies, Co-operatives and Credit Unions?
Yours
Debbie
October 24th, 2008 at 1:15 pm
Debbie: Sarah here from CFS in answer to your question we understand that the necessary legislative change to allow the possibility of a merger between a building society and a co-operative will be in place by the end of the year. But, this does not mean that a merger between The Co-operative Financial Services (CFS) and Britannia Building Society will definitely happen. The two organisations are currently having exploratory talks and as far as CFS is concerned, it is financially strong and therefore unnecessary to the continued success of its business.
The review of the Butterfill Bill is aimed at changing the legislation for merger of credit unions
November 4th, 2008 at 9:25 am
Dear Sarah
Is there any update on the Guernsey situation?
Thank you
Bill
November 6th, 2008 at 4:33 pm
Bill afternoon Sarah here from CFS - We’ve now had clarification from the Financial Service Compensation Scheme (FSCS) regarding the position of deposits held in Guernsey. The FSCS has confirmed that savings held in Guernsey are not covered under the rules of the scheme.
We stress that The Co-operative Bank’s financial position remains financially strong. We are self funded, which means we finance our lending from customers’ deposits and are therefore less reliant on the volatile wholesale markets for funding.
Sorry for the delay.
Sarah