Co-op sees loans rise, profits fall

The Co-operative Bank, best known for its ethical stance, yesterday reported a surge in mortgage lending but a fall in pre-tax profits.

Announcing its results for the first half of this year, the Co-op - which only went back into the mortgage market three years ago - revealed that total loans and advances to customers jumped to £7.4bn from £5.2bn last year.

The bank has expanded its range of mortgages to include variable and fixed-rate home loans but has deliberately avoided the riskier, high loan-to-value end of the market.

At the same time, pre-tax profits for the period fell 7% to £70.1m. This "reflected the strong growth in successful new business acquisition and the consequent upfront costs involved," said a spokesman.

Staff costs were almost £5m higher than last year due to the annual pay award and higher pension costs. In April, the bank announced it was making a one-off payment of £14.4m to help tackle a shortfall in its final salary pension scheme.

Deposits at Smile, the bank's online operation, increased by 9%.

Two years ago the bank merged its management with the Co-operative Insurance Society to create a multibillion-pound business, with each organisation able to cross-sell its financial products.