With just a month to go before the PPI deadline Lloyds Banking Group (LBG) has added a massive £½ billion to its PPI provision to take the total it has set aside to over £2 billion.
Announcing its half year figures, the bank said it had added another £500 million to the £100 million set aside in May.
Amazingly, even this massive addition may not be enough to cover the compensation paid out for mis-sold policies and the administrative costs of dealing with hundreds of thousands of new claims.
In a statement LBG said: “The total amount provided for PPI represents the Group’s best estimate of the likely future cost.
A number of risks and uncertainties remain including with respect to future complaint volumes, however the potential impact of these risks has reduced due to the proximity of the industry deadline.
“The cost could differ from the Group’s estimates and the assumptions underpinning them, and could result in a further provision being required.
“For every additional 1,000 reactive complaints per week from July 2019 through to the industry deadline, the Group would expect an additional charge of approximately £20 million.”
This uncertainty has been a feature across the UK banking industry for some time with officials admitting that as the August 29th deadline draws closer many more people are making mis-selling claims than expected.
Santander has just increased its own PPI compensation pot by £70 million for the same reason.
In LBG’s case it says the number of PPI information requests (PIRs) it receives as risen from a normal 70,000 a week to 190,000 and it expects them to remain at that level until the cut-off date.
Not all PIRs result in full claims, but the bank is anticipating an extra 200,000 complaints in the last four weeks which will increase its total number of complaints from 5.6 to 5.8 million.
In the half year statement it says it had £1.08 billion still in its PPI provision at the end of June and had paid out £896 million in the first half of this year.
Millions still to be claimed?
LBG estimates it has sold 16 million PPI policies since 2000 but admits it has only ‘contacted, settled or provided for’ 54% of the total.
While not all policies were mis-sold, it is possible there are still many that were which means they could be worth millions of pounds to consumers provided they make their claim before midnight on August 29th.