April 7, 2006

By Peter Kenny

Co-operative Financial Services have announced profits of £135.7 million in the year to January 14th, however, the groups bad debt rose by over 40% to £99.8 million from £70.7 million.

Although the groups overall profit rose by nearly 4% from 2005, the increase in bad debt of nearly £30 million has had a detrimental effect.

Co-operative Financial Services (CFS) include The Co-operative Bank, Co-operative Insurance Society and the internet bank Smile. In a statement the CFS said, “The deterioration in the credit climate, at a time when unemployment and interest rates remain at historically low levels, appears to reflect the unprecedented level of consumer indebtedness and a significant rise in personal bankruptcies."

This increase in bad debt is being mostly blamed on and comes hard on the heels of Barclays announcing record profits but higher bad debt. Back in February Barclays had profits of over £3.5 billion, however, the profits from their credit card division Barclaycard fell by 205 to £685 million.

Not long after these profit announcements came the news that Barclaycard were tightening up on credit card applications, reducing credit limits and in an effort to increase profits, reduced the interest free period for consumers who paid off their balance every month.

With these latest figures coming out from the Co-operative Bank we will probably see some effort and movement to reduce their bad debt and protect them from future problems. These moves will probably resemble the one taken by Barclaycard.