Lloyds profits as bad debts fall but mis-selling bill hits £8bn

Lloyds Banking Group almost doubled its profit in the last quarter but the tax-payer-backed group was stung with another £750m charge for mis-selling payment protection insurance, taking its total PPI bill to more than £8bn.

Lloyds' chief executive, Antonio Horta-Osorio, said that he welcomed any plans by the Government to include retail investors in the next sale of Treasury-owned shares, which could come early next year. They were excluded from the first, £3.2bn sell-off last month which cut the taxpayer stake from 39 per cent to 33 per cent.

Mr Horta-Osorio said: "Lloyds already has the largest retail shareholder base in the country, with more than 3 million individuals owning 12 per cent of the company. It is up to the Government on how and when the next sale takes place but we are absolutely sympathetic to extending the offer to retail investors."

A key part of that sale will be Lloyds' ability to restart paying dividends. It has already begun discussions with the banking regulator and will announce its policy at its full year results. However, Mr Horta-Osorio declared: "We are going to be a high-dividend-paying stock."

Headline profits rose from £831m to £1.52bn in the three months to the end of September as bad debts fell and the net interest rate margin earned by the bank rose.

Mr Horta-Osorio said: "The UK economic recovery is gathering pace, which has helped [in terms of] both lower impairments and higher margins."

He also pointed out that Lloyds has now sold or got out of all the major none-core businesses and countries that it planned to 15 months ahead of schedule. The latest big sell-offs included its German insurance arm.

Mr Horta-Osorio said Lloyds, and its subsidiary, had seen a "significant increase" in mortgage inquiries and applications since the launch of the Government's Help to Buy scheme. He explained: "These are primarily first- time buyers – young people who can meet the monthly repayments on their mortgages but could not necessarily raise the 20 per cent deposit needed to get on the housing ladder."

Lloyds also revealed that the costs of Project Verde – the 632 branches it was ordered to sell by the European Union as a condition of its £20bn bail-out – have increased by another £586m. That takes the total to £1.37bn, which includes the aborted sale of the business to the Co-op Bank and the subsequent relaunch of the branches as TSB with plans for it to be floated on the stock market in the middle of next year.

Lloyds' finance director, George Culmer, said this was still within the £1.6bn that he expected it to cost to create a standalone TSB.

However, he admitted there could be additional costs involved in the IPO and in running the two banks side by side for a time.

Co-op boss: 'I was never sure about Verde deal'

The former Co-operative Bank chief Barry Tootell has admitted he was concerned about its ill-fated deal for 632 Lloyds branches as early as 2011.

Mr Tootell yesterday told MPs on the Treasury Select Committee he was unsure whether the Project Verde takeover was in the Co-op's best interests after he took over from Neville Richardson in July 2011.

The £750m deal was scrapped this April as concerns mounted about the group's capital position. Mr Tootell quit a month later.

Jamie Dunkley

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