Lloyds expected to set aside £400m more for PPI claims

Lloyds could set aside millions more to address payment protection insurance (PPI) misselling claims this week when it reports results alongside banking peers Barclays.

Monday, 30th July 2018, 7:00 am

Analysts are waiting to see whether UK banks report higher costs linked to compensation for PPI after a new ad push by the Financial Conduct Authority was launched ahead of next year’s claims cut-off date.

“In an ironic unhelpful twist of fate the bank-funded Arnold Schwarzenegger-esque advertising campaign for the 29 August 2019 PPI claims deadline appears to have brought refund request volumes back,” UBS analysts warned.

Lloyds Banking Group is expected to top up its PPI provisions by as much as £410m in the second quarter alone, according to forecasts by Morgan Stanley.

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It will add to the £90m set aside for PPI claims cost in the first three months of the financial year, which brought its total bill for the saga to an eye-watering £18.8 billion.

However, it still managed to raise bottom line profits by 23% to £1.6bn over the first quarter.

The bank has been undergoing an overhaul of its workforce and branch network, having most recently announced plans to cut 450 jobs mainly affecting back office staff, while creating 255 new roles.

Consensus figures are now pointing to a slight drop in underlying pre-tax profits coming in at £4bn for the half-year, down slightly from £4.5bn a year earlier.

Barclays itself already took a £400m PPI charge in the first quarter, while its half-year results are also likely to reflect a “modest restructuring expense” as a result of completing the ring fencing of its retail banking operations, UBS has said.