The most recent quarterly results from Lloyds Bank show that the bank is still paying out large sums in PPI compensation.
The figures show that the banking group set aside £550m for the first six months of this year to pay compensation to customers who were mis-sold PPI, roughly half the amount they paid out this time last year. Of that sum, £460m was paid out between April and June.
The figures show that the ongoing PPI scandal is still a huge deal, with the banking industry as a whole paying out over £400m in compensation during May alone. However, the industry deadline for claiming compensation has been set at the end of August 2019.
Lloyds said that they had set aside funds to account for 11,000 claims per week running until the deadline next year. Over the last quarter they had received an average of 13,000 claims per week, 2,000 more than they planned for. The bank said that every additional 1,000 claims over their estimate would cost them £150m.
In response to what the bank described as a “higher total volume of complaints and associated administration costs due to higher reactive complaint volumes received over the past six months and ongoing volatility”, Lloyds said that they were adjusting “the remaining provision [to be] consistent with an average of approximately 13,000 complaints per week through to the industry deadline of the end of August 2019.”
Lloyds went on to say that the were not ruling out needing to increase the compensation pot again before that deadline.
Since 2000, Lloyds has sold roughly 16 million PPI policies, a figure including policies that were legitimate and those that were mis-sold. The bank said that it had already handled 53% of the claims, which had cost it a total of £19.2bn over the over the course of the scandal.
Despite this latest round of costs, Lloyds’ Chief executive António Horta-Osório was optimistic, saying “we have delivered another strong and sustainable financial performance with increased statutory profits, higher returns, and a strong capital build. We have made a strong start in implementing the strategic initiatives which will digitise the group, enhance customer propositions, maximise our capabilities as an integrated financial services provider and transform the way we work.”
Mr. Horta-Osório was referring to the ambitious restructuring Lloyds has embarked upon in order to bring its operating costs down below £8bn by 2020. The bank spent £377m on the restructure over the last quarter, which included increased digitisation. The bank reaffirmed its commitment to becoming the largest physical, and digital bank in the UK.
Horta-Osório’s strategy and optimism appears to be paying off and was reflected in the figures published by the bank. The cost cutting measures introduced across the bank have seen it grow its underlying pre-tax profits for the last 6 months by 7%, up to £4.2bn, whilst its statutory pre-tax profits have risen by almost a quarter, to £3.1bn. However, despite this promising growth, the Lloyds share growth remains sluggish, trading slightly lower than last year despite seeing a 2% increase following the release of their quarterly figures.