Investors rocked as Lloyds raises PPI provisions to £10bn

 

Lloyds Banking Group shocked investors with yet another round of extra provisions for mis-selling payment-protection insurance (PPI), taking the total bill to a devastating £10bn, without any concrete guarantee that no more will follow.

However, the bad news about the further £1.8bn going into its PPI mis-selling pot was countered with news that Lloyds would start paying a dividend for 2014, making it what chief executive Antonio Horta-Osorio called a “normal bank” again.

That in turn paves the way for a major privatisation of the taxpayer’s stake in the business as soon as March.

If economic conditions suit, the Treasury hopes to launch one big sale of shares to the public in the spring, followed by another in the autumn, possibly raising twice as much as the £3.2bn sale to institutional investors carried out last September.

The taxpayer still owns  23.3 billion shares in Lloyds, equivalent to £18.9bn at last night’s closing price, which was down 3.4 per cent on the day at 79.99p.

Analysts said it was disappointing a dividend would not be payable for 2013, adding that guidance on the anticipated size of the divi for 2014 was disappointingly low – it was to be “modest”, the company said.

We are seeing the makings of a welcome return to privately owned banks. Prosperity, however, is another matter  

However, sources in the bank claimed it had never led investors to expect a dividend for the 2013 financial year. Some observers pointed out it would have caused a furore if Lloyds had signalled a bumper dividend payout at the same time as hiking up the magnitude of the PPI fiasco.

Mr Horta-Osorio said: “It was very important to be considered a normal bank by 2014 and be able to pay a dividend for 2014.”

Asked if the latest PPI cost would be final, finance director George Culmer said: “I don’t expect any more on top of this but you can never be absolutely certain.”

An analysis of the numbers shows complaints are starting to slow, currently 25 per cent down on the quarter, but the administration cost is constantly rising as 7,000 workers plough through the claims.

OUTLOOK: Failed HBOS merger is a cautionary tale for Lloyds privatisation  

Of the £10bn provision, £1bn is for the administration of claims. Also, a little over £2.3bn of the provision has not yet been spent, giving some cause for optimism that the total number will not need to rise again.

Lloyds received a £20bn taxpayer bailout in 2009 following its disastrous takeover of HBOS in 2008 at an average 63.1p a share. The Treasury’s sale to institutions in September was priced at 75p a share.

Mr Horta-Osorio stressed it was up to the Government and UK Financial Invesments (which holds the government’s shares) to determine the timing of the share sale.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
News
people
News
Elton John and David Furnish exchange marriage vows
peopleSinger posts pictures of nuptials throughout the day
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
PROMOTED VIDEO
Sport
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
News
Billie Whitelaw was best known for her close collaboration with playwright Samuel Beckett, here performing in a Beckett Trilogy at The Riverside Studios, Hammersmith
people'Omen' star was best known for stage work with Samuel Beckett
Arts and Entertainment
Mark Wright has won The Apprentice 2014
tvThe Apprentice 2014 final
News
i100
Arts and Entertainment
Darrell Banks’s ‘Open The Door To Your Heart’
music
News
Detective Tam Bui works for the Toronto Police force
news
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'