The Co-operative Group’s chairman, Allan Leighton, has insisted the business was making “stellar progress” despite slumping more than £130m into the red.

The mutual revealed its first losses since its tumultuous year in 2013 – when problems at the Co-operative Bank nearly sank the whole business – as it wrote down the value of its remaining 20% stake in the bank to nil.

Leighton said the £140m additional writedown of the bank, which had already been written down twice in the past year, was “a piece of prudent accounting” while the bank was being sold by its hedge fund owners.

The bank put itself up for sale in February in an attempt to raise more capital and give greater stability to its 4 million customers, four years after it was rescued by hedge funds.

Ian Ellis, the finance director, added that the group was still hopeful that a sale of the bank would be successful and it expected “to get some value from the sale”.

An update on the sale process is expected by mid-April but could come as early as this week. It has been reported that the bank has plunged in value to as little as £45m.

Late last month, the bank said a number of “credible” potential buyers had expressed an interest. Virgin Money and CYBG, the owner of the Clydesdale and Yorkshire bank networks, are thought to be considering offers.

Despite the troubles at the bank, Leighton said the Co-op’s core food stores, funeral homes and insurance businesses had all gained customers and market share under the group’s turnaround plan.

“We have made pretty stellar progress,” he said.

Revenues for the group rose by 3% to £9.5bn in the year to 31 December and operating profit rose by 32% to £148m after lower restructuring costs.

Sales at food stores open more than a year increased by 3.5% despite a cut of about 1% in prices over the period.

The Co-op Group chief executive, Steve Murrells, who took over from Richard Pennycook last month, said the chain was benefiting from the trend towards shopping little and often in local stores and improvements in its food ranges and stores.

He said food prices were now rising by 1.5% to 2%. “This year is going to be different. We will have to work hard to keep a lid on prices.”

Part of the Co-op’s tactics will involve promoting the discounts available via the group’s relaunched membership scheme, which now expects to have 1 million new members by the end of this year, a year earlier than planned. The group’s 5 million members now account for 31% of food sales, up from 20% before the relaunch of the scheme last year.

The scheme encourages people to buy Co-op branded goods by offering a 5% discount, boosting sales of more profitable own-label rather than branded items.

Tom Berry, an analyst at GlobalData, said: “UK grocers have struggled for years to encourage loyalty among consumers since they are increasingly armed with price comparison tools, but the Co-op’s focus on its core customer has driven loyalty and subsequently like-for-like sales.”

Funeral care revenues rose by 3% as the business increased market share for the first time in five years by cutting prices alongside a 69% jump in sales of pre-paid funeral plans.

The Co-op’s insurance sales rose 28%, partly due to inflation in motor insurance premiums.

Leighton admitted that profits would remain under pressure as the Co-op continued to invest in improving its appeal to customers to ensure long-term growth. “We are interested in the operating profit in five years, not five months,” he said.