Lloyds profits rise despite PPI bill

This was despite setting aside a further £1.4 billion to cover compensation to customers who were mis-sold payment protection insurance (PPI), taking the lender’s total PPI bill to £13.4 billion including administrative costs.

According to its half-year results, 98% of customers affected by PPI mis-selling in the past have been contacted by Lloyds as part of its past business review – with any remaining customers to be sent letters by the end of the year.

This was despite incurring a further charge of £435 million the first half of 2015. Underlying profit was up 15% from £3.8bn a year ago to £4.3bn, driven by increasing income and lower impairment charges.

Lloyds said PPI complaints were falling at a slower rate than expected.

Mr Horta-Osorio said the bank would prefer customers to complain directly to it so that compensation goes directly to consumers.

Lloyds, which remains 14.9% owned by the taxpayer, also said it would consider returning capital to shareholders through one-off dividends or share buy backs from the end of this year if its core capital is higher than 12% plus the equivalent of one year’s dividend payment. That could make its stock more attractive to retail investors ahead of a possible sale of shares to them by the government next year.

He said the current process of “dripping” shares into the market, which had resulted in the disposal of around 10% of its capital being disposed of in around six months without any discount needed, was “shrewd”.