Lloyds Banking Group (LON:LLOY) has had to take on a £1.6 billion hit after the second quarter of 2017 to cope with new claims from consumers mis-sold payment protection insurance.
The banking group saw its first set of results since it was completely sold off from the government after the 2008 bailout. The PPI scandal has so far cost the bank an estimated £18.1 billion since 2011.
The FCA has said that Lloyds will refund all of the fees charged for arrears management and broken payment arrangements. The banking group will also pay litigation fees that were given to customers who were involved in related legal action.
Lloyds did not only have to set aside this £1.6 billion for PPI. The lender also set aside £100 million to compensate those customers who were affected by the HBOS Reading fraud for which two former employees were jailed earlier this year.
Antonio Horta-Osario, the chief executive, said “We have a commitment as a management team of putting these legacy charges behind us as soon as possible.” regarding the different pots of money set aside for customers.
Horta-Osario says that he remains confident about the UK economy.
“Inflation is however now rising above disposable income given the recent depreciation in sterling and, while this may affect consumption going forward, the economy should benefit from rising exports and earnings from foreign assets,” he said.
According to Laith Khalaf, senior analyst at stockbrokers Hargreaves Lansdown, whilst Lloyds are facing multiple cases of misconduct, its general performance is promising.
“It’s a sign of Lloyds’ strength that it can shrug off £1.6bn of misconduct charges to post a strong rise in profits,” he said.
“Overall, this is a strong set of numbers from Lloyds, blighted, but not overshadowed, by misconduct costs. The government has exited the bank and is now no longer selling stock in the market, which removes a significant downward pressure on the share price,” he added.