The bank gave warning that the “unprecedented” level of consumer debt would lead to a significant rise in bankruptcies as its bad debt charge for last year ballooned to £99.8 million.

Co-operative Financial Services’ banking division, which includes the Smile internet bank, reported pre-tax profits of £96.5 million for the year to January 14, down £17.8 million from the previous 12 months. However, the pre-tax profits of Co-operative Financial Services as a whole rose by 4 per cent, to £135.7 million, over the same period. The group figure includes contributions from the insurance unit as well as the banking business.

David Anderson, the chief executive of Co-operative Financial Services, said: “The results reflect the increasing indebtedness of the British public.

“Since we are a UK retail bank, we have not had the same protection as the bigger banks, which have large wholesale and international businesses.”

Mr Anderson said that the group’s insurance division was benefiting from a restructuring of the unit 18 months ago, which shaved about £70 million off its costs last year.

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