Lloyds sets aside £1bn extra to cover PPI mis-selling

Lloyds also owns the Bank of Scotland and Halifax brands. Picture: John Devlin

Lloyds also owns the Bank of Scotland and Halifax brands. Picture: John Devlin

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Lloyds Banking Group has set aside another £1 billion to meet compensation claims for the mis-selling of payment protection insurance (PPI).

The part state-owned lender – owner of the Bank of Scotland and Halifax brands – is by far the worst affected by the PPI scandal, and said as part of today’s third-quarter trading update that its total compensation bill has reached £17bn.

The banking industry’s overall PPI bill already stands at more than £30bn.

Earlier this year, the Financial Conduct Authority (FCA) moved to put a June 2019 deadline on claims in an effort to draw a line under what has been one of the biggest banking scandals in history.

READ MORE: Banks facing hit after watchdog extends PPI claims deadline

Lloyds’ extra PPI provision meant that statutory pre-tax profits came in 15 per cent below last year at £811 million in the quarter. Underlying profit for the third quarter fell 3 per cent to just under £2bn.

Results also show a pension hit following the Brexit vote, which comes as company schemes are hammered by falling bond yields. The bank’s schemes moved from a net surplus of £430m to a net deficit of £740m in the quarter.

George Culmer, chief financial officer at Lloyds, said the PPI provision takes the bank through to 2019 and the FCA deadline.

READ MORE: 3,000 more jobs and 200 more branches to go at Lloyds Bank

On Brexit, chief executive Antonio Horta-Osorio said that there has been “no significant” drop in consumer activity following the referendum result.

He added: “We don’t see any change in consumer trends. But on the business side, SMEs and mid-size corporates, there has been some impact on businesses holding back on investment.

“The British economy is in a very strong position facing Brexit. But uncertainty will persist and the economy requires fiscal stimulus in infrastructure and house building.”

In its results, Lloyds also said it has accounted for a further £150m provision to cover other conduct issues, including £100m relating to packaged bank accounts.

The figures come after Chancellor Philip Hammond ditched plans for a Lloyds share sale to the public earlier this month, instead planning to offload the UK government’s remaining 9 per cent stake to institutional investors.

In July, Horta-Osorio announced that Lloyds was cutting 3,000 jobs and shutting 200 branches as part of an efficiency drive.

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