Payment Protection Insurance was widely sold alongside an assortment of financial products, including loans and credit cards, to cover customers’ repayments should they fall sick or lose their job.
The Bank of Ireland’s underlying profits for the first six months stood at 743 million euros (£521 million) compared to 327 million in the first half of 2014.
He said that the bank was assuming a significant decrease in claims over the next 18 months but that, if this did not happen, Lloyds would have to add £3 billion to its PPI provision.
Lloyds chief executive Antonio Horta-Osorio says: “The additional provision for PPI is disappointing and mostly reflects higher than expected reactive complaints with higher associated redress”.
The addition follows a £117m fine by the Financial Conduct Authority earlier this year over its previous mishandling of PPI claims.
“This scandal will rumble on for years unless the banks pull their socks up and start making it much quicker and easier for people to get back the money they’re rightfully owed”.
Having dropped 1.5 per cent in Friday trading, shares are now priced at 84.6p, still well above the 73.6p break-even price for the Treasury.
Profit after tax rose to 874 million (1.245 billion euros, 1.364 billion) in the six months to June from the first half of 2014, LBG said in an earnings statement.
Lloyds is now reviewing or automatically upholding around 1.2m PPI complaints. “I understand the political commitment to a retail share offer and we will do whatever is needed”. That beat the average analyst estimate of 4 billion pounds compiled by the bank. Shares fell 0.5p to 85.5p. Number 10 is also preparing to sell down positions in Royal Bank of Scotland.
Mr Horta-Osorio said Lloyds was on course to be fully privatised in the next 12 months. Limits on acquisitions, imposed by European Union regulators as a result of the bank’s 2008 bailout, have been lifted after Lloyds sold TSB Banking Group Plc to comply with state-aid rules. Valued at £61.6 billion, Lloyds is the second largest bank trading on the London Stock Exchange after HSBC.
The partly taxpayer-owned bank also said it will also pay a dividend of 0.875p per share, costing a total £535mln.
Underlying required equity returns rose incrementally to 16.2%, a 2.2 percentage point improvement on the prior year.
Lloyds’ strategy includes developing its digital offering and reducing costs.
Despite these payouts, the bank still increased profits by 38%.
One issue for investors to be note is the seemingly never-ending saga of mis-selling compensation payments.
Lloyds revealed its bill for PPI mis-selling could jump to £16billion – as it took the first hit for another scandal.