Lloyds raises dividend despite fresh £2bn PPI mis-selling charge

Analysts predict the bank will stomach a £2 billion charge for payment protection insurance (PPI) mis-selling in the fourth quarter, followed by a £1.1 billion hit for 2016/17.

But Lloyds today said underlying profits lifted five per cent to £8.1 billion and confirmed it was giving staff thousands of pounds in bonuses, as well as giving its chief executive a six per cent pay rise.

Pre tax profits dropped to GBP1.6bn for 2015, from GBP1.8bn the preceding year, dragged down by the PPI supply in the fourth quarter.

Lloyds has announced a final dividend for 2015 of 1.5p, taking the full-year payout to 2.25p, with a further 0.5p special dividend on top.

Separately, the company noted that despite better underlying financial results in 2015, its total bonus outcome has reduced year-on-year to 353.7 million pounds from last year’s 369.5 million pounds.

In Europe, Germany’s Dax was up just under 1.5%, while the Cac 40 in France rose more than 2%, as the Eurozone’s region-wide inflation figure reached its highest point since just before the Greek economic crisis last summer at 0.3%. The government postponed the sale of its 9.2 percent stake in Lloyds last month amid turbulent market conditions, pledging to offer stock to consumers when the situation improves.

Jasper Lawler, market analyst at CMC Markets, said: “Some positivity has burst through the cloud of worry in markets”.

The FTSE 100 also had a good morning, climbing 2.3% to 6003.

But 4% of the salary rise will only be paid in shares, which will be awarded when the Government sells its final 9% stake in the group.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Lloyds has put aside a huge amount for PPI in anticipation of the end of the claims saga, which has cost the bank £16 billion to date”.

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“Despite the group pointing out that return on equity targets would be delayed by one year, it will be interesting to find out if the positive aspects of the results restore investor confidence and potentially bring back onto the table the sale of the governments remaining holding to the man on the street”.

Eoin Walsh, portfolio manager at TwentyFour Asset Management, said: “Lloyds has now taken an incredible £16bn of charges for PPI mis-selling”.

The most recent statement for the PPI misselling scandal shoves on Lloyds’ overall damages pot to GBP16bn, accounting for almost half the complete PPI supply of the sector.