Member Article

Lloyds sets £1bn aside for PPI compensation

Lloyds banking group announced a £583m statutory loss for the last nine months after a £1bn provision for compensatory insurance payments.

PPI claims hit Barclays bank yesterday, and Lloyds has suffered the same issues, despite cost reductions of 5% and underlying profit increases of 148%.

Pre-tax losses of £144m were posted in comparison to £607m for the same period in 2011, while the bank said it had achieved profit rises despite a reduced income.

Lloyds Group’s Chief Executive, António Horta-Osório, pledged to support the SME sector with £13bn lending this year, which he says is currently on track.

Manufacturers will also benefit from a further £1bn of loans, which will be divided by September next year.

Small and medium-sized firms received increased lending by 4% in the last three quarters, after the bank became the first in the UK to access the Government’s Funding for Lending scheme last month.

The bank outdid aims to help 300,000 startup businesses this year already, and the Chief expressed his hopes that this would stimulate economic output and improve sentiment.

Mr Horta-Osório said: “We have a strong commitment to helping Britain prosper, and our early participation in the Funding for Lending scheme is enabling us to extend further financing to businesses and customers.”

As part of this focus on supporting sustainable economic growth, we are continuing to increase SME lending on a net basis in a contracting market,

“We remain confident that, by delivering our strategy to be a simple, customer-focused UK retail and commercial bank, we can rebuild the trust of our customers and other stakeholders and can deliver sustainable returns for our shareholders over time.”

Reuben Berg, senior partner at law firm Berg, commented on the results: “This move by Lloyds is yet more evidence of how much banks exploited retail customers and effectively used PPI as a way to pad out their profits.

“Similarly, the bank has also admitted to mis-selling interest rate swaps to businesses, something else which will reduce future profits as those companies seek compensation.

“Unfortunately for shareholders in Lloyds, this is likely to be a long and drawn-out process. The Financial Services Authority scheme to compensate those mis-sold interest-rate swaps is yet to be fully-functioning and PPI claims could take years to clear.

“However, it may at least create abanking market which works much more effectively for consumers and businesses.”

This was posted in Bdaily's Members' News section by Miranda Dobson .