Lloyds’ PPI compensation bill reaches £13bn

“We have 7000 people processing complaints, yet one-third of the complaints we receive do not have a valid PPI policy behind them”, he said.

Announcing that the group will make an interim dividend payment of 0.75p per share, chief executive Antonio Horta-Osorio added: “Today’s results demonstrate the strong progress we have made in the first half of the year”.

The bank called the additional provision “disappointing”, in its earnings report and attributed it in part to having received a higher than expected number of complaints.

A series of disposals by the Treasury has raised around £13bn for taxpayers.

That huge PPI provision took the total bill for the scandal to £13.4 billion and optimises the final chance to provide for redress on a tax-deductible basis, according to analysts.

The loans – a mix of commercial assets given out by HBOS before Lloyds bought the bank in a controversial deal at the height of the financial crisis in 2008 – were sold to a consortium of investors including a Goldman Sachs affiliate and Bank of Ireland.

The bank also set aside another £435m to cover misconduct including packaged account mis-selling and a fine for poor complaints handling.

Profits for the first six months of the year stood at £1.19 billion, compared to £863 million over the same period in 2014.

“The amount of retained capital is likely to vary from time to time depending on circumstances, but is now around 12% plus an amount broadly equivalent to a further year’s ordinary dividend”. The retail offer is expected to take place in February or March 2016 and would see a portion of shares sold at a five per cent discount to their market value.

Shares fell as this overshadowed an improved half-year performance.

Mr Horta-Osorio said Lloyds was on course to be fully privatised over the next year. “If any bank fails to do this, the regulator must step in”. The improvement in our profitability and capital position has enabled the Group to announce an interim dividend payment of 0.75 pence per share to our shareholders. Underlying profit, which strips out costs such as the provision for PPI, increased to GBP4.38 billion from GBP3.82 billion, as revenue increased due to higher net interest income, stable costs and lower impairment charges for bad loans.

Meanwhile, the United Kingdom government is slowly selling down its stake after mandating an investment bank to drip shares into the market. This is nearly half of the £26 billion allocated by the industry and the claims are continuing to roll in – all of which will be funded from the bank’s profits.