The fund to pay Lloyds PPI refunds increased by £1.4 billion in the last quarter, and it could increase even more according to the bank´s CEO Antonio Horta-Osorio.
The Lloyds Banking Group has now put aside £13.4 billion pounds to pay customers of Lloyds PPI refunds – more than half the total provision of the entire UK banking industry – and Antonio Horta-Osorio has admitted that the mis-selling scandal could cost the banking group another £1 billion pounds this year and £2 billion more in 2016.
Commenting that he was “disappointed” with the rate at which claims for Lloyds PPI refunds were declining, Mr Horta-Osorio acknowledged that the situation could get worse before it gets better. More than 1.2 million claim for Lloyds PPI refunds are being re-assessed following the FCA´s £117 million fine for the failure to investigate PPI claims against Lloyds.
The implications of the recent Plevin –v- Paragon Personal Finance court case – in which the claimant won the right to claim PPI compensation because she was not fully informed of how much commission was being paid to brokers – could result in the banking group receiving millions more claims for Lloyds PPI refunds. The specialist securities firm Cenkos has estimated that the cost of Lloyds PPI refunds for this reason alone could be as high as £10 billion.
The reason that the PPI scandal has hit the Lloyds Banking Group harder than most other financial institutions in the UK was that it sold more than 16 million PPI policies since 2000. It has now settled claims on 45 percent of these policies – such was the scale of mis-selling by the banking group – and the current increase in the fund to pay Lloyds PPI refunds assumes that there will be a significant decrease in claims volumes.
In addition to the increase in the fund to pay Lloyds PPI refunds, the banking group´s first half report revealed for the first time the cost of refunding customers for the mis-selling of packaged bank accounts. The Lloyds Banking Group set aside £175 million to account for the volume of Packaged Bank Account Claims for compensation that have been received – significantly less than its High Street rivals the Royal Bank of Scotland (£300 million) and Barclays (£200 million).Read More