Big banks set to reveal further PPI scandal hit

Lloyds is expected to be among the worst affected
Lloyds is expected to be among the worst affected

Britain’s biggest banks are expected to reveal another mammoth hit from the payment protection insurance (PPI) scandal in this week’s third quarter updates.

The mis-selling scandal is set to dominate updates from many of the major lenders after the City watchdog, the FCA, announced plans in the summer to push back the deadline for PPI claims by a year to mid-2019.

Lloyds Banking Group, Barclays, Royal Bank of Scotland (RBS) and Santander are all due to post figures during the course of the week and analysts are braced for them to collectively put by as much as £2 billion in extra PPI provisions.

The industry’s PPI bill is already colossal, at more than £30bn so far.

The FCA’s move to put a deadline on claims will draw a line under what has been one of the biggest banking scandals in history.

But its plan to set the deadline for June 2019 - instead of the originally proposed April 2018 cut off - drew criticism from the industry.

Lloyds, which is by far the worst affected by the PPI scandal, could reveal a further charge of as much as £1.5bn when it kicks off the sector’s third quarter updates on Wednesday, according to Citi experts.

UBS is expecting a more modest PPI top-up of £800 million to cover claims up until the 2019 deadline, given that Lloyds already has £2bn in unused provisions.

Lloyds’ results will also show a pension hit following the Brexit vote, as will many of its rivals as company schemes have been hammered by falling bond yields.

Its figures come after Chancellor Philip Hammond ditched plans for a Lloyds share sale to the public earlier this month, instead planning to offload the Government’s remaining 9% stake to institutional investors.