The mutual said the banking's arm financial strength was "solid" and that it was taking steps to improve its capital position ahead of the planned deal with Lloyds, which must offload the branches to meet state-aid rules.
The Co-op's swoop for 632 Lloyds branches is under further scrutiny after its banking division racked up annual losses of £662 million.
The Co-op blamed the big banking loss on loan impairments on non-core operations mainly relating to its 2009 acquisition of Britannia and a further provision of £150 million to cover payment protection mis-selling.
However, its core banking business still saw profits fall to £120 million, from £173 million a year ago.
Group results, including its food arm and specialist operations in pharmacy and funeralcare, showed an 18% fall in operating profits to £431 million. Including the banking hit, bottom-line losses were £599 million.
The Co-op announced a deal this week to sell its life insurance and asset management arm to Royal London and has confirmed it will sell its general insurance arm in a move that will unlock capital for its banking arm.
It said: "We are not complacent about our financial strength and our strategic focus is on implementing a range of measures targeted at increasing the health of our capital ratios."
The bank's core tier 1 ratio, a measure of capital strength, fell to 8.8% from 9.6% during the year, although actions taken since the year end have reversed some of the decline to 9.2%.
According to a report in the Financial Times last month, the Co-op faced a £1 billion shortfall in its capital position.
The Co-op's deal with Lloyds is worth up to £750 million and will boost its branch network to nearly 1,000, adding another 4.8 million customers to its existing 6.5 million base. In food retail, total sales were marginally higher at £7.44 billion, with like-for-like sales in its core convenience store estate up 1.9%.