Lloyds provisions for PPI compensation top £13bn

Lloyds called the additional bill “disappointing” and revealed it had increased to 1.4 million the number of complaints it had initially rejected but was now reviewing afresh.

It also lifted guidance for its asset quality ratio – a measure of impairments for bad loans as a percentage of average loans to customers – as underlying impairment charges fell by 75% to GBP179 million.

For the first half, pretax profit climbed 38 percent to 1.19 billion pounds from 863 million pounds in the previous year.

“On the current earnings forecast this translates to a dividend of about 5p per share in the next two or three years, which is a yield of around 6% with scope to grow in the longer term”, said Message, manager of the Old Mutual UK Income Fund, which holds a 3.6% weighting in the bank.

Lloyds said that in PPI, reactive complaints are being driven by claims management companies.

“We think that a proper timeline done in a fair way would be a positive thing to do”, Lloyds chief executive Antonio Horta-Osorio said. The government has cut its stake in Lloyds to less than 15 per cent from 43 per cent.

Earlier this month, the Financial Times estimated the “drip feed” disposal has brought in £13bn, with the remaining shares valued at around £9bn.

Lloyds was responsible for issuing just under half of all PPI policies, implying that the total sum which may have ended up in the pockets of the claims industry might already have hit £3.5bn.

“We are disappointed to announce further provisions today, but we do so from a position of financial and capital strength”, Mr Horta-Osorio said.

Lloyds has taken a total of £13.4bn in charges for PPI so far, more than any other bank.

Last month, Lloyds was fined a record £117m by the Financial Conduct Authority (FCA) over the mis-sold PPI.

Lloyds has announced an interim dividend payment of 0.75p per share in its half year results, but the banking giant said it would also consider special dividends in the future.

He added that the lender was undergoing a “digital revolution” with more than 11 million online users and almost six million using its mobile services.

That could make its stock more attractive to retail investors ahead of a possible sale of shares to them by the government next year.

“We aim to outgrow the market in this under-represented area”, Horta-Osorio said at the time. 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.