August 4, 2015
The fund to pay Lloyds PPI compensation claims increased by £1.4 billion in the last quarter, and there could be more to come according to group´s CEO.
With the latest addition to the fund to pay Lloyds PPI compensation claims, the Lloyds Banking Group has now allocated £13.4 billion pounds for the mis-selling of PPI – more than half the total provision of the entire UK banking industry.
Describing the additional provision as “disappointing”, the group´s CEO – Antonio Horta-Osario – admitted that the situation could get worse before it gets better, and that shareholders could expect the group to allocate a further £1 billion pounds this year – and £2 billion more in 2016 – to cover the volume of Lloyds PPI compensation claims.
More than 1.2 million Lloyds PPI compensation claims are being re-assessed following the Financial Conduct Authority´s £117 million fine for the group´s failings in fairly assessing customers´ claims, and millions more are expected following the Supreme Court´s verdict in Plevin –v- Paragon Personal Finance. The specialist securities firm Cenkos has forecast that the verdict in “Plevin” could cost the Lloyds Banking Group £10 billion.
One of the reasons that the provision to pay Lloyds PPI compensation claims is so much higher than provisions made by other financial institutions is that the banking group sold sixteen million PPI policies in the UK from 2000. Claims against 45 percent of these policies have now been settled but – judging by the addition to the fund to pay Lloyds PPI compensation claims – the volume that claims are being received is not decreasing as fast as the group expected.
Also revealed in the group´s first half report was the volume at which branches of the Lloyds Banking Group mis-sold packaged bank accounts. The group set aside £175 million to pay compensation for mis-sold packaged bank accounts during the first half of the year. This figure is also expected to increase as claims volumes escalate based on the provisions put aside by Lloyds High Street competitors. The RBS Group allocated £300 million to pay compensation for mis-sold packaged bank accounts, while Barclays put aside £200 million.