Lloyds PPI mis-selling bill rises to £18.2bn

Lloyds Banking Group set aside another £700 million to deal with PPI compensation, taking the total bill to £18.2 billion for perhaps the most extraordinary mis-selling scandal ever.

In its first results statement since the Government sold the last of its shares in the bailed-out bank, Lloyds raised its PPI provision for the 17th time.

Lloyds has, on several occasions, insisted there would be no more bad news on PPI.

It is also paying out £300 million to 600,000 customers who were charged incorrect amounts for late mortgage payments.

The Financial Conduct Authority has been investigating the issue.

There was good news for Lloyds’ 2.4 million-strong army of small shareholders in the form of an 18% rise in the interim divi to 1p a share. For the average investor with 6000 shares, that divi is worth £60.

Half-year profits rose 4% to £2.54 billion despite the write-offs for misconduct. The shares dipped nearly 2% to 68p. They were 89p in May 2015.

Lloyds’ chief executive Antonio Horta Osorio, who insists he is committed to the bank in the face of endless speculation he will leave to join HSBC, today fended off talk of a consumer debt bubble.

The UK economy “remains resilient” he said, noting that “consumers have been deleveraging over the past 10 years” and can therefore afford to take on a bit more debt at the moment as inflation goes past wage rises.

This is a “very reasonable situation”, he said.

Laith Khalaf at Hargreaves Lansdown noted: “The bank has chosen not to increase the £100 million provision made in the first quarter for compensating victims of the HBOS Reading fraud, despite TV host Noel Edmonds reportedly increasing his claim to £300 million.”

Lloyds says it is “disappointed” that the HBOS Reading issue is not being resolved more quickly.

Khalaf added: “It’s a sign of Lloyds’ strength that it can shrug off £1.6 billion of misconduct charges to post a strong rise in profits,” he said.

“Overall, this is a strong set of numbers from Lloyds, blighted, but not overshadowed, by misconduct costs.

“The Government has exited the bank and is now no longer selling stock in the market, which removes a significant downward pressure on the share price.”