Lloyds takes fresh £1bn PPI hit as it urges public spend

L Bank’s pension scheme moves into red l UK consumer spending holding up

Lloyds Banking Group posted falling profits after earmark‑ ing an extra £1 billion for the paymentprotectioninsurance (PPI) scandal yesterday, as it urged the Chancellor to turn on the spending taps in his Autumn Statement.

The PPI hit takes Lloyds’ total bill for the affair to £17bn, more than half the industry’s exposure of £30bn, as third‑ quarter pre‑tax profits fell 15 per cent to £811 million.

Chief executive Antonio Hor‑ ta‑osorio said there had been “no significant” decline in con‑ sumer activity following the Brexit vote on 23 June.

But he said there had been evidence before and after the EU referendum of small and medium‑sized corporates reining in investment, and called on Philip Hammond in his upcoming Autumn State‑ ment for “fiscal stimulus in infrastructure and house‑ building”.

The Lloyds boss added: “It is possible to borrow long‑term money at close to zero cost and allocate that money to the right projects.

“This will help productivity and investment that in turn will counter the effect of Brex‑ it uncertainty.” Lloyds, still 9 per cent owned by the taxpay‑ er, indicated that it expected the latest provision for PPI to be the last major one before the new claims deadline of summer 2019.

The results come after the Chancellor recently ditched plans for a Lloyds share sale to the public, switching instead amid stock market volatility to winding down the remain‑ ing holding via sales to institu‑ tional investors.

Excluding exceptional items, underlying Q3 profits at the bank were 3 per cent lower at £1.9bn, while total income rose 1 per cent to £4.27bn.

As was widely expected, the bank also reported a £740m deficit in its pension fund – compared with a £430m sur‑ plus in the previous quar‑ ter. Following the Brexit vote, big British companies have been hit by falling bond yields affecting their pension schemes.

Lloyds shares closed up 1 per cent at 55.88p – well down on the 90p they were trading at 18 months ago. Analysts say that is partly due to investor cau‑ tion about the prospects for the UK economy, for which the bank is largely seen as a proxy with more than 30 per cent of the country’s current accounts and mortgages.

Neil Wilson, markets analyst at ETX capital, said: “Investors have cooled on Lloyds of late and these results won’t make them love it any more.

“It’s not just PPI – Lloyds is hugely exposed to the UK economy and there is a worry post‑brexit that this will crimp earnings going forward. Low‑ er interest rates aren’t helping either.”

Horta‑osorio was present‑ ing his first results since apol‑ ogising to staff in August over “adverse publicity” related to his private life. l Spanish‑owned Santander UK’S pre‑tax profit slipped to £477m in the three months to September, as it warned of a “more challenging macro‑ economic environment” post the Brexit vote.