Lloyds takes another £1bn hit for further PPI compensation claims

LLOYDS Banking Group has set aside another £1bn to cover payment protection insurance (PPI) mis-selling claims, bringing its half-year profits in below analyst expectations.

Shares in the bank fell 2.3pc to 67.5p yesterday as the news overshadowed the fact that the results marked the lender’s biggest half-year profit in eight years. The higher than expected PPI charge, alongside £540m in other misconduct provisions, meant that Lloyd’s pre-tax profits rose just 4pc to £2.5bn in the six months to June 30, missing City expectations of £2.9bn.

Lloyds’ total bill for the PPI scandal now stands at just over £18bn, the largest in the banking sector. On top of the PPI hit, the bank also confirmed yesterday that it will repay £283m back to 590,000 mortgage customers who were mistakenly charged for going into arrears between 2009 and January 2016. Lloyds also put £100m aside for compensation to the victims of the HBOS Reading fraud.

George Culmer, chief financial officer, said: “We’ve also put some money aside for packaged bank accounts and then we have some of the other amounts spread across the retail insurance businesses.”

The rise in profits will nonetheless be seen as another boost for Antonio Horta-osorio, the bank’s chief executive, who said this was an “important time for Lloyds” given it was the first set of results since it returned to full private ownership in May following its bailout at the height of the financial crisis.

Although the sale of the state’s final stake in Lloyds prompted speculation Mr Horta-osorio could move on, the bank chief said yesterday he had “no intention of going anywhere”.

He also sounded an upbeat tone on the UK economy, saying it “remains resilient” despite uncertainties. While inflation has been rising above disposable income, he pointed out that exports and earnings from foreign assets are also increasing to create “a balanced situation”.

♦ TSB said the fees it was paying to former owner Lloyds Banking Group had hit its underlying profits in the first-half, dragging them down 40pc on last year to £49.3m.