Fresh PPI woes for Bank of Scotland owner Lloyds

Lloyds Banking Group owns Bank of Scotland. Picture: Louise Kerr

Lloyds, which also owns Scottish Widows, will now suspend the remainder of its 2019 share buyback scheme, with some £600 million of the £1.75 billion programme expected to be unused at mid-September.

The banking giant revealed that, in the month leading up to the PPI deadline of 29 August, claims per week more than trebled from around 190,000 to between 600,000 and 800,000.

The decision comes after Royal Bank of Scotland, Co-op and CYBG, which owns Virgin Money and the Clydesdale and Yorkshire banks, increased their own PPI provisions following a surge of interest ahead of last month’s deadline.

Lloyds – easily the most exposed to PPI – said the extra claims are expected to see a £1.2bn to £1.8bn charge added at its next set of results, taking the total for PPI provisions to more than £20bn.

However, the group said it remains uncertain over the true level of claims, pointing out: “While the quality of these complaint volumes remains uncertain, given initial sampling, we believe the quality has continued at a low level.”

Banks had complained in the past that customers were making claims even though they had never even taken out loans with the banks.

Lloyds had already revealed a £650m PPI charge at its half-year results, for the six months to July, but its latest announcement will see that figure grow.

An estimated 64 million PPI policies were sold in the UK, many in the 1990s and early 2000s. They were intended to cover missed debt repayments and were frequently marketed to consumers using aggressive tactics.

In the last few weeks, CYBG said it was setting aside an extra £450m after 340,000 customers requested information over PPI.

Co-op Bank also said it had received a flood of requests, and Santander UK was forced to extend the deadline after its website crashed under the strain of applications.

RBS will take a fresh hit of up to £900m for PPI after a surge in last-minute claims, adding to a bill that has already exceeded £5bn.

Shore Capital analyst Gary Greenwood noted: “[Lloyds] has stated that it will give consideration to the distribution of surplus capital at the year end and will continue to target a progressive and sustainable ordinary dividend.

“We do not expect the group will end the year with a material surplus capital position and so any further distribution is likely to be relatively small, in our view. We continue to view Lloyds shares as being materially undervalued.”