Customers desert High Street banks for the Co-op

"It's been a good year for a bank not to have a share price," said David Anderson, chief executive of Co-operative Financial Services (CFS), which also includes the insurance business. "You can't speculate against a mutual."

Net new current accounts opened in the year to 10 January soared to 75,000 from 31,000 in 2007.

Anderson said: "It is clear that a lot of people are jaded with the big High Street banks, particularly those which have received large Government support. And that trend is continuing well into 2009."

During 2008 Co-op Bank saw a 65% rise in the numbers of people switching their current accounts away from other banks, which is enormous in what is traditionally a very stable market.

The biggest increase in defections were from Alliance & Leicester (163%), Royal Bank of Scotland (117%) and Halifax (96%).

Anderson said the switching really kicked off shortly after Lehman Brothers went bust in September 2008 as people began to worry about the security of their own banks.

The bank and Smile both won several consumer awards and plaudits from small business groups.

Anderson also said that there had been a sizeable pick-up in people coming to the Co-op for long-term savings products.

"We did not need to go to the Government for any support or assistance," he added. "Our investment writedowns are relatively small and our bad loan writedowns were lower than the previous year's."

With loans covered 106% by deposits, the bank remained a net lender to the wholesale market last year, which emphasises how conservative its business model remains. Rival banks saw their ability to fund from the wholesale market dry up for much of last year, forcing them to cut lending.

By contrast, Co-op saw savers' balances rise by 17%, which allowed it to fund a 24% increase in mortgage lending and a 23% rise in lending to businesses.

Profits for CFS fell 5% to £155 million with the bank's profit up 70% to £85.6 million but insurance's down 87% at £8.4 million.

At the end of this month, members of the country's second-largest building society, Britannia, are expected to approve its merger with CFS. That will create a group with around £75 billion of assets.

Anderson is very excited about the deal: "I genuinely believe that a vote in favour from Britannia members would be transformational, not just for the mutual and co-operative sector, but for the UK financial services sector as whole," he said.

Assuming the vote goes his way, Anderson expects the deal to complete in late July.