When the Financial Conduct Authority announced earlier this month that it wanted to impose a two-year deadline for PPI claims, it seemed like the end of the scandal was finally in sight. Not so for Lloyds, though, which set aside another £500m today to cover payouts for the mis-sold insurance.
That takes the bank’s total provision to a staggering £13.9bn, of which £2.1bn is still ‘unutilised’. That’s by far the largest share of the roughly £21bn that UK banks have spent so far compensating customers.
Lloyds’ shares fell 4.6% this morning to 73.8p, as the rest of its third quarter results also disappointed investors. Its pre-tax profit grew 28% year-on-year to £958m, but underlying profits of £1.97bn undershot the £2.1bn analysts had expected and was 8% lower than last year.
Meanwhile, revenues in the quarter slipped 4% to £4.2bn, as commercial banking was ‘tougher’ than expected. ‘The UK is not really immune to the global slowdown should be the takeaway,’ Cirantan Barua, an analyst at Bernstein, said.
Lloyds looks in ruder health than RBS, though. The latter is still 73%-owned by the government. The Treasury now has a stake of just 12% in Lloyds, after gradually selling down a holding that was 43% at the height of the financial crisis.
Nonetheless, these worse-than-expected results may take the shine of George Osborne’s ‘Tell Sid’ share sale, in which £2bn of Lloyds shares are set to be flogged off to individual retail investors at a discount next spring. Banks may be largely out of the woods after a dark seven years since the financial crisis kicked off, but it was never going to be a straightforward journey.