Lloyds' PPI Mis-Selling Bill Passes £6.5bn
Lloyds Banking Group will tomorrow allocate roughly £1.3bn more for payment protection insurance (PPI) mis-selling compensation, taking the bill for the big four UK lenders soaring past £12.5bn.
Lloyds will make the latest provision in its annual results, and I have learnt that it is to be larger than the most pessimistic analysts' forecasts. Insiders said today that it could be nudged even higher than £1.3bn following discussions between the bank's directors in recent days.
By adding such a giant sum to its PPI bill, Lloyds, which is 39 per cent-owned by the taxpayer, will take its own PPI mis-selling bill to more than £6.5bn, more than half the aggregate sum for the big four lenders.
To date, Barclays has set aside £2.6bn, RBS has allocated £2.2bn, including a £450m provision today, and HSBC, which reports results next week, has written off £1.4bn.
Antonio Horta-Osorio, Lloyds' chief executive, is keen to use tomorrow's results to call the top of the PPI compensation bandwagon, having previously attacked claims management firms for fuelling a mis-selling culture.
Sources close to the bank say that Mr Horta-Osorio may indicate that he has cooled on the idea of an industry-wide effort to secure a deadline for PPI compensation claims.
The British Bankers' Association has been in talks for several months about a so-called 'time-barring exercise', which would involve the industry funding a massive advertising campaign to promote awareness of PPI mis-selling in return for a cut-off date for claims.
Consumer groups have, however, attacked the project, arguing that banks should not be allowed to set a deadline for consumers to receive redress for banks' misbehaviour.
Lloyds will also confirm tomorrow Sky News' revelation that the bank is to award its chief executive a bonus for 2012 of between £1.4m and £1.5m.
Payment will only be released to Mr Horta-Osorio when Lloyds' share price hits the level at which the taxpayer bought into the bank in 2008, after Lloyds TSB's takeover of HBOS left it close to collapse.
The new structure is designed to avert a row about the scale of reward available to Mr Horta-Osorio at a time when it is having to allocate many billions of pounds because of product mis-selling. The bank was also fined
The latest PPI provision will mean that Lloyds had to set aside nearly £3.5bn in compensation in 2012 alone, a figure that will ignite protests that Mr Horta-Osorio should not be awarded a bonus at all.
Lloyds will also disclose a compensation pot of approximately £300m for mis-selling interest rate hedging products to small business customers.
It is the PPI bill that has damaged the bank to the greatest extent, however. Tomorrow it is likely to report a loss of several hundred million pounds.
Lloyds declined to comment.