Co-op Group plunges to £132m loss as 20% bank stake is written off

The Co-operative Group has written off the value of its 20% stake in the troubled Co-op Bank, reporting an annual loss of £132m.

The results for 2016 represented the group’s first pre-tax annual loss since 2013, but it was keen to point out that it was no reflection on the continuing recovery in the wider business as revenues and operating profits both grew.

The group said it took a £140m hit in the bank stake writedown, to zero, confirming a story by Sky News on Saturday.

It described the valuation as "prudent" but the move marked the third consecutive reporting period in which the Co-op had slashed the value of the bank shareholding.

Its stake was reduced to 20% in 2013 when a group of hedge funds injected cash into the lender to save it from collapse after the discovery of a £1.5bn black hole in its finances.

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It has since been put up for sale. Any potential bidders had until Tuesday to express interest, though legacy issues and its pension deficit are potential hurdles to a sale.

While there have been enquiries, a ‘plan B’ to a sale – in the form of a capital raising – could take place if no credible offers emerge, otherwise the bank faces the prospect of being wound down in an orderly fashion.

The Co-op said the process would not disrupt its overhaul of the mutual and its wider investment plans.

It reported a 3% jump in group revenues to £9.5bn, with Co-op Food, Funeralcare and Insurance "all delivering strong levels of growth."

Steve Murrells, group chief executive of the Co-op, said: "We’ve made great progress in rebuilding our Co-op, with all our businesses delivering strong performances.

"While much remains to be done, our rebuild plans have really started to deliver value for our customers, our members and their communities."

But the group admitted: "All of our markets remain fiercely competitive and we face a challenging consumer and economic backdrop."

(c) Sky News 2017: Co-op Group plunges to £132m loss as 20% bank stake is written off