Lloyds takes £1bn hit over mis-sold insurance
LLOYDS BANKING Group has set aside another £1 billion charge to compensate customers mis-sold loan insurance, taking its charge for the scandal to £5.3 billion and dragging it to a third-quarter loss.
Britain’s biggest retail bank had already set aside £4.3 billion to repay customers wrongly sold payment protection insurance (PPI), far higher than rivals as it had the biggest share of the market for PPI products – which have become one of Britain’s biggest consumer finance scandals.
Lloyds, which blames claims management companies for exacerbating the problem by submitting false claims, said it had paid out or spent £3.7 billion on the issue by the end of September, or 70 per cent of its previous provisions.
Like other British banks, Lloyds faces multibillion pound losses to cover wrongly sold insurance on mortgages and other loans, often to people whose circumstances meant they were barred from making claims. But the PPI scandal is only the latest instance of British banks being found to have mis-sold products, a list that also includes the sale of specialist financial products known as swaps to small business, some of whom were left with big losses rather than the protection against interest rate moves they expected.
The total cost of payouts for the industry could hit £15 billion and some analysts have estimated Lloyds’ final PPI bill could rise to as much as £7.6 billion. Barclays said earlier this week it took a PPI-related charge of £700 million in the third quarter, taking its total to £2 billion.
On a more positive tack, Lloyds announced falling losses from loans that turn sour and said its cost-cutting programme was ahead of target. The bank has reduced its loan book, cut costs and reined in bad debts as part of a recovery plan devised by chief executive Antonio Horta-Osorio to turn round the bank, which was bailed out in 2008 leaving Britain with a 40 per cent stake.
Lloyds reported a pretax loss of £144 million for the three months to the end of September, compared with a loss of £607 million a year earlier. However, its underlying profit rose to £840 million from 419 million a year before.Shares in Lloyds were up 2.5 per cent to 43.1 pence at lunchtime yesterday. – (Reuters)