PPI provisions dog Lloyds even as it basks in profit again

Comment Martin Flanagan

As Benjamin Franklin didn’t quite say, the only certainties in life are death, taxes and more payment protection insurance (PPI) provisions at Lloyds Banking Group. We have just had episode 17, and many financial journalists may wish they had viewed the saga as a box set to at least get shot of it.

The latest £700 million PPI charge at Lloyds takes its total redress bill on the issue to a sector-leading £18.2 billion. Not that surprising given loan insurance is often linked to mortgages, and Lloyds, which also takes in Halifax, has not far off a third of that market in the UK.

Even now the bank’s chief financial officer George Culmer says he cannot say definitively that this will be the end of the matter for PPI provisions ahead of the 2019 deadline for customers to seek compensation.

It’s a pity. Historical mis-selling claims – Lloyds has also taken a hit on improper charges made on customers who were late with their mortgage payments – remain a fading scar on an altogether more freshfaced business that continues to drive earnings forward and make double-digit dividend payments after emerging finally from part state ownership since the financial crisis.

Chief executive Antonio Horta-osorio says he has confidence in UK economic prospects even as the Bank of England has voiced concern that consumers may be building up a household debt bubble again. The boss’s stance is predictable given Lloyds is the most exposed bank to the UK economy, and he wouldn’t want to scare the horses. Spirits leviathan Diageo is swimming downstream. Strong profits, major share buyback, improved profit margin guidance. Slàinte!