Britain’s biggest mutually owned retailer is braced for an onslaught on its two most fruitful areas: convenience stores and banking.

The Co-operative Group yesterday reported market-leading sales growth in its retail division and a rise in half-year profits, but a period of ambitious acquisitions is about to come to a halt.

Peter Marks, the chief executive, said that the Co-op’s acquisition of Somerfield had given rise to a new order among supermarket chains, as a result of which the “Big Four”, comprising Tesco, Asda, Sainsbury’s and Morrisons, had become the “Big Five”.

“We’re by far and away the No 1 small store operator,” he said. “We’re bigger than all the rest of them combined, in terms of convenience stores. We have a market-leading position and we’re going to consolidate that.”

Mr Marks was speaking as the Co-op reported a 17 per cent year-on-year rise in first-half profits, to £229 million, with like-for-like sales rising by 7.3 per cent. Revenue across the group rose to £6.7 billion in the 28 weeks to July 25.

Last week Tesco, Britain’s biggest supermarket and the second-largest behind the Co-op in the convenience sector, reported like-for-like sales growth of only 3.7 per cent for the six months to August 29.

But analysts predict that the convenience sector, one of the fastest-growing areas of food retailing, will become increasingly competitive. Last month Waitrose announced plans to open up to 300 convenience stores, while Sainsbury’s has raised £430 million to expand its selling space and plans to add to its 300 Local stores. Tesco recently opened its 1,000th Tesco Express and Morrisons is running trials of a similar store concept.

Matthew Piner, retail analyst at Verdict, said that the big supermarkets, having expanded on out-of-town sites for much of the past 15 years, were now faced with a dearth of new development opportunities and were hamstrung by competition regulations. He added: “All of them are switching their attention to the convenience sector.”

The sector grew by 6.1 per cent last year and is worth a total of £29.1 billion, according to IGD, the research body.

Mr Marks said that the Co-op’s rebranding of Somerfield stores was progressing on schedule: it has transferred 28 stores so far and aims to have converted 200 by the end of the year.

The company has almost 3,000 stores. Nearly half of Britain’s 50,000 convenience stores are independent, but Co-op says that it commands about 25 per cent of the market.

Sales of the Co-op’s value range, which was relaunched and extended under the Co-operative Simply Value label in March, were up almost 80 per cent year-on-year. Fairtrade products experienced growth of 35 per cent.

Co-operative Financial Services (CFS) reported a rise in underlying shareholder profit of 11 per cent to £81.4 million, helped by growth in customer deposits, lending and new insurance sales. Since the end of the first half on August 1, it has taken over the Britannia Building Society.

During the financial crisis, the Co-op sought to capitalise on the public’s lack of trust in banks with a marketing campaign featuring Bob Dylan’s idealistic song Blowin’ in the Wind, emphasising the collective nature of its business model and ethical credentials. “There’s no doubt that our ownership structure gave people confidence,” Mr Marks said.

But that was two years ago. Now it is braced for another battle, this time in financial services, as Tesco, the UK’s largest retailer, prepares to offer mortgages and current accounts.

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