The Co-op said today that it’s cashing in on the general public’s disillusionment with high street banks: its financial services arm saw profits jump 11% in the first half of its financial year. Delighted chief exec Peter Marks said it was a sign that the public had lost trust in banks and were looking for companies like the Co-op with an ‘ethical approach’. It would be nice to think that such an approach can pay dividends, even in a cut-throat sector like banking – although once the public gets this opprobrium out of its system, it’ll be interesting to see whether the Co-op can hang onto these customers…
The Co-op said today that applications for its current accounts shot up by a whopping 50% in the last six months, which does seem to suggest that it’s picking up some dissatisfied customers from the high street banks (unless these are all former spendthrifts finally deciding that it’s about time they started saving some money). In fact, with average deposits up and a capital cushion of nearly 13%, the financial services arm looks in remarkably rude health. Marks ascribes this to such hoary banking practices as funding lending from customer deposits, i.e. money they’ve actually got. How quaint.
And it’s not just the banking arm that’s doing well. The Co-op’s grocery business also had a good few months, with like-for-like sales increasing 7.3% and 450 ex-Somerfield stores boosting its portfolio. Admittedly most of the big grocers have enjoyed solid growth in the last year (thanks in large part to sharp food inflation, which now seem to have slowed), so perhaps we shouldn’t read too much into this. But it’s worth noting that Co-op’s Fairtrade sales were up 35% during the period – so it doesn’t look as though shoppers are using the recession as an excuse to ditch their principles.
So all in all it’s been a pretty good half-year for the Co-op, with pre-tax profits soaring 17% to £229m. And it’s not that surprising: with the public experiencing one of those periodic bouts of conscience we see from time to time, they’re perfectly positioned to cash in on the unpopularity of the banks. The question is whether punters will start drifting away in search of better deals once they’ve got it out of their system…
And the bigger and more successful Co-op gets, the harder it will be to maintain its cuddly image. There have already been reports that it’s using its new Somerfield-fuelled muscle to start making more aggressive demands of its fresh produce suppliers. Not great for the ethical credentials...
In today's bulletin:
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ITV chaos continues as Bishop turns down chairman role
Ethical banking pays big dividends for the Co-op
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