Lloyds sets aside billions over payment protection mis-sales
Lloyds Banking Group has been forced to set aside a huge sum of money to cover potential costs related to its mis-selling of payment protection insurance (PPI).
The bank has made a provision of £3.2 billion for contacting its PPI customers and making recompense where necessary.
As a result it posted a £3.47 billion loss for the first quarter of 2011, compared with a £721 million profit in the same period of 2010.
Last month, the High Court dismissed an appeal brought by the British Bankers’ Association (BBA) against new PPI measures put forward by the Financial Services Authority.
The regulator wants banks to review their past sales of PPI and despite having been successful in the High Court it is possible that the BBA may mount a further appeal.
Meanwhile, the part taxpayer-owned Lloyds saw a substantial reduction in government support in the three months to the end of March, to £70.4 billion.
The bank also reported a “satisfactory” trading performance on a combined business basis, given a subdued economic environment.
A group impairment charge of £2.6 billion was around £0.5 billion above expectations, predominantly due to losses in Ireland where the lender has been hit by tumbling commercial property prices.