31st October 2013
The compensation bill for payment protection insurance (PPI) at Lloyds Banking Group will soar past £8bn on Tuesday as it grapples with the legacy of one of Britain's worst mis-selling scandals.
Sky News has learnt that the taxpayer-backed lender will announce that it has set aside at least £700m more for PPI redress just months after saying it hoped it had drawn a line under the issue.
The additional figure that Lloyds will earmark for PPI mis-selling at its third-quarter results was agreed by board directors and the bank's auditor in the last few days.
While the exact charge was unclear on Monday, it is expected that it will take the total bill - which stands at £7.3bn - to more than £8bn, a figure equivalent to about half the overall tab for the UK banking sector.
It will nevertheless cause some embarrassment to Lloyds, whose directors have been dogged by the bank's status as by far the largest retailer of PPI products in the country.
At its half-year results in July, it said in relation to misconduct charges that a new £500m charge represented "the group’s best estimate of the likely future costs, but a number of risks and uncertainties remain…The costs of these factors could differ materially from our estimates, which could result in a further provision being required.”
The new PPI hit will be a rare blight on the performance of the country's biggest retail bank, which is expected to demonstrate solid progress in relation to costs, capital and profitability under the stewardship of Antonio Horta-Osorio.
During the quarter to the end of September, George Osborne, the Chancellor, sold a 6% stake in Lloyds, underlining optimism about the trajectory of the UK economy.
Taxpayers now own just under 33% of Lloyds, and the Government is likely to sell shares to the public during the first half of next year.
The continuing nature of the PPI scandal underlines how one of the banking sector's most profitable products in the years after 2000 has become a giant millstone around its neck.
Read More: http://news.sky.com/story/1160767/lloyds-ppi-bill-hits-8bn-as-claims-pour-in
Posted in Lloyds Banking Group, PPI, Sky News, PPI Redress