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Lloyds ups PPI bill and warns of ‘long and difficult’ recovery
Lloyds Banking Group today revealed it has been forced to put aside an extra £375 million to pay PPI compensation claims, as chief executive António Horta-Osório warned of a difficult recovery for the UK economy.
The move brings its total PPI bill to nearly £3.6 billion, and comes just one week after Barclays increased its PPI provision by £300 million.
Lloyds said there had been an increase in the volume of complaints received recently and therefore had to up its provision accordingly. It said it would continue to monitor the position closely.
PPI, or payment protection insurance, is supposed to cover your debt repayments in the event you are unable to work, but has been mis-sold in millions of people in recent years.
In total the major banks are expected to fork out more than £6 billion in compensation, having so far paid £3 billion, according to new figures from the Financial Services Authority.
Barclays raises PPI provision by £300m
An increase in the number of payment protection insurance (PPI) claims means that three major UK banks are increasing the provisions they have set aside to repay customers who were mis-sold PPI.
Barclays, the Royal Bank of Scotland (RBS) and HSBC are all preparing to increase their provisions.
Lloyds Banking Group, which set aside the largest amount to cover potential PPI compensation, £3.2 billion, says it is monitoring the situation closely but has not decided to increase its provision at this time.
Customers were mis-sold PPI, which is a type of insurance that is designed to protect they become ill or lose their jobs.
Announcing its first quarter results, Barclays has increased its provisions by £300 million to £1.3 billion.
Barclays PPI exposure rises by £300m
Barclays is taking an extra £300m hit for payment protection insurance as it prepares to face shareholders in a showdown over its pay policies at Friday’s annual meeting.
The bank reported its first-quarter results the day before its annual meeting at which one in four shareholders are expected to register a protest against the bank’s pay policies, particularly the £17m handed to the chief executive, Bob Diamond, and the £5.7m the bank paid to cover his tax when he relocated from the US to become chief executive.
Diamond refused to indicate the scale of the protest against the remuneration report or comment on the impact that the focus on the pay deals is having on the business after the Institute of Directors described Barclays’ pay as “out of order”.
The increase in the PPI provision, which came after the bank had warned in March that it might have to raise the £1bn provision, may indicate that other banks such as Royal Bank of Scotland and HSBC might also be facing higher bills to pay compensation for the insurance.
Barclays admits second serious error on swap sales
The bank has confirmed it mistakenly sold interest rate hedges to some small business clients using a presentation that had only been authorised to be shown to “investment professionals”.
A disclaimer document seen by The Daily Telegraph states that the presentation was “not for distribution to retail clients”, despite the customer in question being a small hotelier who did not fit the definition of a professional investor.
A spokesman for Barclays said: “The wording was included in some presentations by mistake,” but added that it “did not influence the way we dealt with our customers”.
PPI leads huge complaints spike
The number of complaints made to banks and other financial firms rose by 21% to 2,256,172 during the final six months of 2011, according to City watchdog the Financial Services Authority.
Complaints about mis-sold PPI — which covers loan and card payments if you cannot work — rose by 85% to 977,510 in that period.
This jump in claims over debt insurance mis-selling was expected after banks lost a High Court case last year where they had attempted to derail plans to force lenders to automatically refund those mis-sold.