Gladstone Brookes | Lloyds PPI provision tops £13 billion

Lloyds PPI provision tops £13 billion

LLoyds PPI tops £13 billion

Lloyds Banking Group (LBG) have raised their PPI payout pot by a further £1.4 billion, increasing their overall provision to £13.4 billion.

Chief Financial Officer, George Culmer, revealed in the bank’s half yearly figures that £2.2 billion of the figure remains unused.  It is intended to cover future successful claims and the cost of the Past Business Review Lloyds have had to carry out on 1.4 million previously rejected or potentially underpaid cases.


The size of the increased provision was described by chief executive, Antonio Horta-Osorio, as ‘disappointing.’

In his statement he said: “It mostly reflects higher than expected reactive complaints with higher associated redress.”

Case review

The re-examination of past cases followed a review by the Financial Conduct Authority (FCA) of the way in which PPI cases were dealt with throughout the banking industry.  The review was provoked by the large number of rejections which were overturned by the Financial Ombudsman Service (FOS) as being unfair.

Under a heading ‘Rebuilding Trust’ in the half yearly report, Mr Horta-Osorio says: “Regrettably, the UK banking sector is still being impacted by conduct issues, including litigation and PPI. We reached a settlement with the Financial Conduct Authority in June in relation to aspects of our past PPI complaint handling processes.


“We are fully committed to improving our operational procedures and ensuring we do the right thing for our customers. In support of rebuilding customer trust, we have continued to transform the corporate culture and have completely overhauled the performance and reward framework for our customer-facing colleagues, with performance now predominantly assessed on the basis of customer feedback.”

The bank was hit with a record fine of £117 million from the FCA earlier this year for the mis-handling of PPI complaints.  An FCA spokesman said at the time: “As a result of Lloyds misconduct, a significant number of customer complaints were unfairly rejected.

“The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds.  Customers who had already been treated unfairly once, by being mis-sold PPI, were treated unfairly a second time and denied the redress they were owed.  Lloyds conduct was unacceptable.”

Future claims

Looking to the future, George Culmer said the rate of complaints was expected to drop towards the end of 2015, but he warned: “If this decline is delayed by six months and reactive complaints remain at the same level as the first half of 2015, this would lead to an additional provision of approximately £1 billion at the end of the year and a similar level of provisioning would be required for each six months of flat complaint volumes in 2016.”

Plevin case

What those figures don’t take into account is any possible increase in compensation which could arise from the landmark Plevin case of last year in which the Supreme Court ruled that a PPI sale was unfair if the seller failed to reveal large commissions from the product provider.

The impact of the decision is still being assessed by the UK banking industry, the FCA and FOS, but some experts believe they could now be facing a further £33 billion bill for compensation, making it even bigger than the current PPI scandal.

Commenting in the report, George Culmer says: “Given the current uncertainty, it is not presently possible to estimate the financial impact of the Plevin decision and accordingly no additional provision has been established at this stage, but it is possible that the impact could be material.”


Overall the bank has posted a £1.19 billion, up from the £863 million of 2014 and plans continue to be made for its re-privatisation with shares being sold in small increments to City institutions.

Chancellor George Osborne has announced he intends to complete the re-privatisation with a sale of the remaining shares to members of the public at a discounted rate with free shares available to anyone hanging onto their allocation for a year or more.

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