Mis-sold PPIs Rips Lloyds Banking Group another £100m

Wednesday, May 22nd, 2019

A recent payment protection insurance(PPI) scandal has taken a toll on Lloyds banking group, causing the lender to set aside £100 million to compensate the PPI mis-selling complain costs.

The banking group has reported static quarterly profits with pre-tax profits in the first three months of the year at £1.6bn, no different from the previous year’s performance.

The bank’s chief executive says that as the uncertainness of Brexit increases, it could impact negatively on the UK economy.

However, he remains confident that the banking group’s unique business model, market-leading efficiency, and investment targets will still be dedicated to providing quality services seamlessly to shareholders and customers.

Lloyd banking group says that the quality of its assets is still the same with no deterioration observed.

The Royal Bank of Scotland and Barclays have also experienced flat Q1 profits holding accountable the intense competition in the mortgage business and the slow investments due to the uncertainty surrounding Brexit.

How the £100 million can help

With the release of their latest update, the banking group’s shares have stayed in the red remaining low at 1.75 % or 1.06p to 62.54p. In the previous year, the same time, the bank’s share price was around 67.08p.

The total amount of money deposited in retail accounts has grown to £75.2 billion from £72.7 billion at the same time the previous year.

The bank has seen a profit rise of 8 % to £2.2 billion throughout this period, with net income increasing by 2% to £4.4 billion and a four percent decrease in operating costs to £1.97 billion. The group says that it remains focused on meeting its financial targets.

The compensation of the mis-sold PPIs to the affected clients has continued to drain Lloyd’s profits, causing the bank to miss out on exclusive revenues and affecting its quarterly earnings and goals.

Lloyd’s direct exposure to the UK economy and the uncertainness of Brexit could lead to a rise of impairments.

PPI deadline

The UK’s finance regulator has set a deadline of 29th August 2019 for the affected mis-selling clients to make claims to the bank. Major banks are setting aside billions for future claims with £34bn already paid out to the whole industry.

Lloyds banking group has set aside £750m for payment protection insurance claims with the latest £100m summing up to £19.525bn. In the UK alone, a total of 64 million PPIs have been sold since the 1970s. They were insurance for loan repayments in case those who borrowed lost their jobs or fell ill.

The sales of these PPIs were pushed on a lot of people who did not require them or were in no position of using them. However, not all PPIs were mis-sold.

Charges

The banking group has booked charges totaling to £126m for costs on restructuring throughout the period, with a 9% margin to the previous year’s fees
An additional £339m has been charged on the present value of an investment management agreement made by Lloyd bank and Standard Life Aberdeen.

Finally

These mis-sold PPIs have been a stumbling block for Lloyds Banking Group. Hopefully, the bank will not have to set aside more money to address the issue.