PPI bill soars to £27bn
Scandal costs banks £1,000 for every family in Britain
BRITAIN’S biggest banks have racked up a bill of almost £27bn for the PPI scandal – the equivalent of almost £ 1,000 for every household in the UK.
The staggering milestone was reached as Lloyds revealed it had set aside another £1.4bn, taking its bill so far to £13.4bn.
The latest provision was around £ 400m more than had been expected as complaints have continued to flood in. This spooked investors with shares dropping 2.82p to 83.2p – making Lloyds the biggest faller in the blue chip FTSE 100 index.
The state-backed lender, which still managed to post a 38pc surge in profits to £1.2bn in the first half of the year, said it expected complaints to tail off more sharply.
But it warned that if they come in at current levels it will be forced to set aside £1bn every six months.
It has had to trawl old cases, and was fined a record £117m by the Financial Conduct Authority in June for not handling PPI complaints properly.
Chief executive Antonio Horta-Osorio called for a time limit to be put on PPI complaints, arguing that a quarter of complaints come from customers who never took out a PPI policy – with two-thirds coming from ‘no win, no fee’ claims management companies.
The FCA is expected to publish its recommendations soon. The idea of a time bar has been rejected by consumer campaigners but Horta-Osorio said: ‘We think that a proper timeline done in a fair way would be a positive thing to do.’
He pointed out the huge costs of dealing with disputes, including from customers who never took out a PPI policy in the first place.
Lloyds has 7,000 staff handling these cases, which result in average payouts of £2,000.
The bill for administration and staff costs alone for the PPI scandal has climbed to around £3bn.
Earlier this week, Barclays’ compensation bill for PPI climbed to £6bn after it made another £600m provision in the first half.
Lloyds was also forced to set aside another £435m for other ‘misconduct’ issues, including £175m for complaints related to the sale of fee charging ‘packaged accounts’.
Finance chief George Culmer played down concerns that banks will eventually be forced to pay out billions to compensate customers who were sold packaged accounts. These typically charge a monthly fee of between £6 and £25 for extras such as travel insurance and breakdown cover. Banks have been accused of aggressively selling these to customers – even if they already have the insurance or are too old to claim on the policies.
Culmer said: ‘We categorically don’t see this as the next PPI scandal.’ He added that Lloyds is upholding three in ten complaints about packaged accounts, compared with eight in ten about PPI.
Stripping out the costs for misconduct and other charges – such as £660m from the sale of TSB to Spain’s Sabadell – profits jumped 15pc to £4.4bn. The bank declared an interim dividend of 0.75p a share, amounting to £535m. But it is now considering whether to use its excess capital to pay a special dividend or launch a shares buyback.
Horta-Osorio said Lloyds’ ability to pay made it ‘clearly more attractive’ for the Government to offer shares to the public. The government has cut its stake in Lloyds to less than 15pc from 43pc.