Co-op banking arm braced for deep loss

The Co'op's banking woes continue to haunt the mutual. Picture: Reuters
The Co'op's banking woes continue to haunt the mutual. Picture: Reuters
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Half-year results from the Co-operative Group and its stricken banking arm will take centre stage this week, while under-pressure support services firms G4S and Serco also report.

More details of the Co-operative Bank’s woes will be unveiled on Thursday when it posts its first set of figures since being thrown into turmoil after revealing a mammoth hole in its finances.

The Co-op’s half-year figures are expected to show more deep losses triggered by impaired commercial property loans from its disastrous acquisition of the Britannia Building Society. These sent the group plunging to a £673.7 million loss in 2012.

The mutual is expected to slash the value of the bank to zero in coming months and is due to give an update on the painful restructuring later in the autumn. Its £1.5 billion rescue needs the backing of investors through a “bail-in” that will see bondholders given shares in the bank.

Support services groups G4S and Serco will reveal the impact of high-profile rows with the UK government when they publish first-half results. Auditors found both firms overcharged the government by “tens of millions of pounds” by billing for tagging offenders who were back in prison, had had their tags removed, had left the country, had never been tagged in the first place or had died.

Serco and G4S then withdrew from the running for a new tagging contract, which has since been handed to four firms including Capita.

G4S, which reports tomorrow, is no stranger to controversy after its London 2012 Olympics contract fiasco. Cantor Fitzgerald analysts see underlying annual profits at the firm dipping to £408.7m this year from £412m a year earlier.

Meanwhile Serco, which reports on Thursday, faces the triple threat of squeezed revenues, profit margin headwinds and cash pressures.

Despite these pressures, Serco has told the City to expect strong revenue growth for the first six months, as previous contract wins filter through. Investec expects the group, took over the Northern Isles ferry service last year, to report underlying full-year profits of £283.2m, up 4 per cent on £271.6m in 2012.