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Lloyds sets aside another £700m for PPI insurance claims

Lloyds Banking Group has set aside another £1bn to cover the cost of insurance mis-selling and the treatment of mortgage customers.Another £700m will cover payment protection insurance (PPI) claims and £283m will be used to repay about 590,000 mortgage holders.It came as Lloyds posted half-year pre-tax profits of £2.5bn, 4% higher than last year.The results are the first since the government sold its stake in the bank.The repayment to mortgage customers comes after they were mistakenly charged from 2009 to 2016 after going into arrears.The Financial Conduct Authority had been investigating the issue, concluding that the bank did not always do enough to understand customers’ circumstances and check that their arrears payment plans were affordable and sustainable. The FCA says Lloyds will refund all fees charged for arrears management and broken payment arrangements, and it will also pay any litigation fees that were applied unfairly to customers who were involved in related legal action. On top of that, it will also offer payments for potential distress and inconvenience.The bank will itself approach customers to prompt them to make a claim.Small business customers who suffered as a result of the HBOS Reading branch fraud were told Lloyds is currently undertaking a review of what happened.It is in the process of paying compensation to the victims of the fraud, for which it set aside £100m in the first quarter.Crisis legacyIt is the PPI mis-selling scandal, though, that dwarfs all others.Lloyds alone has now set aside £18bn. In total, UK lenders have been forced to set aside more than £30bn to cover PPI compensation costs.PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments.Lloyds became the UK’s biggest force in personal banking as a result of its absorption of HBOS – the former Halifax and Bank of Scotland – at the height of the financial crisis and was bailed out by the government at a cost of about £20bn.The government had been steadily offloading its Lloyds stake, resulting in about £21bn being returned to the taxpayer.The government still owns 73% of Royal Bank of Scotland, which was rescued with £45.5bn of taxpayers’ cash during the crisis in the world’s biggest bank bailout.Laith Khalaf, senior analyst at stockbrokers Hargreaves Lansdown, said that despite the size of the provisions for the various types of misconduct, Lloyds’ performance was satisfactory. “It’s a sign of Lloyds’ strength that it can shrug off £1.6bn 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.”
Source: BBC News

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