Lloyds Banking Group had to pay out a further £460m in PPI compensation between April and June, its latest results have revealed.
The bank put aside a total of £550m in the six-month period to June 30, to provide compensation to Lloyds customers caught up in the payment protection insurance (PPI) mis-selling scandal.
Lloyds Bank said the additional half-billion pound provision in the second quarter would cover claims currently coming in at a rate of approximately 13,000 per week, 2,000 claims per week more than the run rate previously assumed, until the compensation deadline in August 2019.
This latest compensation round takes the total amount put aside by the banking group to clear up the PPI scandal to £19.2bn.
The banking group said: “The charge in the second quarter is largely driven by a potentially higher total volume of complaints and associated administration costs due to higher reactive complaint volumes received over the past six months and ongoing volatility.
“Since the commencement of the PPI redress programme in 2011 the group estimates that it has contacted, settled or provided for approximately 53 per cent of the policies sold since 2000.”
The group said that it has sold approximately 16 million PPI policies since 2000, which includes both legitimate and mis-sold policies.
Lloyds would not rule out the possibility of having to increase the PPI compensation pot further, saying that “a number of risks and uncertainties remain including with respect to future volumes”.
“The cost could differ from the group’s estimates and the assumptions underpinning them, and could result in a further provision being required,” the bank added.
It also said that in the year up to the compensation deadline in August 2019, for every additional 1,000 complaints per week above the current weekly average of 13,000, the group would expect to incur an additional charge of £150m.
Lloyds was also hit by £377m in restructuring costs, including staff redundancy payments as part of a three-year strategy focusing on digital banking.
The bank recently announced plans to cut 450 jobs mainly affecting back office staff, while creating 255 new roles.
Lloyds is currently aiming to cut its operating costs to less than £8bn by 2020.
Despite the charges, a cost-cutting drive across the bank helped deliver a rise in half-year profits.
Underlying pretax profit rose 7% to £4.2bn over the six months to June 30, while statutory pre-tax profits surged 23% to £3.1bn.
Lloyds shares were up nearly 2% in early trading.
Chief executive Antonio Horta-Osorio said: “We have delivered another strong and sustainable financial performance with increased statutory profits, higher returns, and a strong capital build.
“We have made a strong start in implementing the strategic initiatives which will digitise the group, enhance customer propositions, maximise our capabilities as an integrated financial services provider and transform the way we work.”
Laith Khalaf, senior analyst at Hargreaves Lansdown said: “The huge jump in Lloyds’ reported profits can largely be summed up in just three letters – PPI.
“While the bank has taken another £550m hit in the first half of 2018, that’s around half what it had to put aside this time last year.”
From – SkyNews