Lloyds back in red after £8bn PPI bill

Group records pre-tax losses of £440m in the third quarter of the year, compared with a £151m loss in the same period last year

Lloyds Banking Group's bill for compensating customers who were mis-sold payment protection insurance (PPI) has risen to more than £8 billion, helping the state-backed lender slide back into the red.

The business, which is 33 per cent owned by the taxpayer, increased PPI provisions by £750 million as it notched up statutory pre-tax losses of £440 million for the third quarter.

It shows how the impact of the scandal, which has affected a number of banks, continues to grow more than two years after Lloyds announced it was setting aside £3.2 billion to deal with claims.

The latest charge, together with other costs from the legacy of its troubled past, masked an improved day-to-day performance as underlying profits nearly doubled to £1.52 billion - adding to pressure on the Government to dispose of its remaining stake.

A 6 per cent chunk was sold to institutional investors for £3.2 billion last month.

Lloyds also said it was in talks with regulators about re-starting dividend payments for the first time since 2008.

Following its rescue by the taxpayer after swallowing up troubled Halifax Bank of Scotland during the financial crisis, the group's drive to return to profit has been increasingly hampered by the costs of PPI.

Lloyds has already spent £6.3 billion on the compensation programme. Of the £8 billion in total now set aside, £1.7 billion is earmarked for administration costs alone.

In the third quarter, a higher-than-expected £706 million was spent, including £161 million for administration. The average rate of upheld complaints has been rising since the start of the year, the bank said.

The overall volume of complaints has been falling, but more slowly than expected. Weekly complaints were running at 11,000, down from 12,500 in the second quarter.

Lloyds had swung out of the red earlier this year with half-year profits of £2.1 billion.

Since then it has spun off more than 600 branches under the revived TSB brand, which it hopes to float next year. But the costs of the move were among the hits to the balance sheet in the latest results.

The bottom line was further weighed down by losses from the group's continued disposal of non-core assets that it does not see as part of its more streamlined future.

During the period it disposed of a German life insurance business as well as operations in Australia.

Shares dipped nearly 4 per cent on the results but later recouped some of the losses and they remained above the 73.6p on average paid for the stock by the Government.

Chief executive Antonio Horta-Osorio stands to qualify for a shares bonus worth around £2.3 million on paper should the price remain above that level until November 20 - though he will not be able to cash in on them until 2018.

Mr Horta-Osorio said: "We are well on our way to becoming a better, simpler, low-risk bank, which delivers the products our customers need and the strong performance and sustainable returns our shareholders expect."

Richard Hunter, head of equities at Hargreaves Lansdown, said: "Lloyds has thrown the ball back into the court of the Government to ponder whether the time has come to dispose of its remaining stake and leave the company to its own devices."

He said the resumption of dividend payments would add to the attractiveness of the stock for many investors amid low interest rates elsewhere.

But Mr Hunter added: "It is certainly not all plain sailing just yet - the further PPI provision is unwelcome, the costs associated with its branch disposal and non-core assets are financial distractions, whilst competition within the sector is growing at a time when Lloyds is looking to prepare itself for the next chapter."

The latest results are the first in a raft of bank earnings reports due out this week including Royal Bank of Scotland and Barclays.

Elsewhere, Deutsche Bank saw quarterly net profits dwindle to 51 million euro (£44 million) as it set aside 1.2 billion euro (£1 billion) for losses from legal action mainly related to US residential mortgage-backed investments.

Meanwhile Swiss banking giant UBS saw profits of 577 million Swiss francs (£400 million) after losses in the same period last year but warned that profit goals for 2015 would probably not be achieved.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine