Losses deepen at Lloyds

Lloyds has been forced to set aside another £700m to pay off disgruntled PPI claimants, taking the bank's half-year loss to £439m.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
Welcome to the banking steeplechase. The Barclays stallion was nobbled at the Libor-rate fixing fence, HSBC‘s hopeful ended up nose-deep in the murky depths of the money-laundering water pit, RBS’ nag experienced ‘technical issues’, and fell at the customer service hurdle, Bumper Bonuses, the favourite, fell at the first fence way back in February, and now the Black Horse has a lame foreleg, with Lloyds’ increasing its PPI pot from £3.2bn to £4.27bn.

All in all, an electrifying day at the races.

And the drama continues off the course too. Lloyds has not only been forced to find many more millions to deal with compensation claims for its mis-selling of insurance products, the bank is also about to be embroiled in the same Libor-fixing scandal that has so besmirched Barclays’ reputation. Well, Diamond did rather blow the whistle when he told the Treasury Committee that the entire industry was guilty of ‘reprehensible behaviour’…

The question is, how much dirt will the investigation dig up about Lloyds?  The FSA and Department of Justice certainly smell a few steaming divots. ‘Certain members of the group have received subpoenas and requests for information from certain government agencies and are co-operating with their investigations,’ reads a statement from the bank today. ‘In addition, certain members of the group have been named as defendants in private lawsuits, including purported class action suits in the US with regard to the setting of Libor.’

If Lloyds is found guilty of wrongdoing, its balance sheet will take a further hit. Barclays may have only had to pay out £59.5m – a preemptive fine that pundits already believe will be one of the smallest pay-outs we’ll see during the course of the FSA investigation, but these numbers are set to get bigger and bigger. Rather like the mushroom cloud atop this atomic banking mess.

And Lloyds can’t afford to keep handing out million-pound mea culpas. Earlier this month, the Competition Commission forced the bank to sell off more than 600 branches to the Co-operative Bank. A decreased branch portfolio, coupled with the ongoing pressures from the eurozone and the ‘deep crisis in confidence and trust’ in the banking sector as a whole – a direct quote from Lloyds chief executive Antonio Horta-Osorio - equals a whole heap of trouble for the 40%-taxpayer-owned bank.

In fact, MT is willing to bet that Antonio Horta-Osorio wishes he never returned from that sabbatical for exhaustion. If the Black Horse finishes the course, covered in foam, sweat, and saddle sores, there will be no glory for the beleaguered CEO. The best he can hope for, if the departures of Agius, Diamond and del Missier have taught us anything, is a short reprieve from the glue factory.

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