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.
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.
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.