Lloyds Banking Group profits lower on PPI costs

| August 4, 2011

Banking giant Lloyds Banking Group has today said its first half profits were hit by costs relating to its mis-selling of payment protection insurance (PPI).

The controversial insurance has been a hot topic for some time now and the Financial Services Authority (FSA) introduced a review of the insurance after millions of policies were mis-sold and thousands of complaints were received.

Under a PPI policy, an agreed sum of money is paid out each month to fully cover, or cover a percentage of the payment due on your mortgage or loan if you are unable to work, as a result of becoming unemployed or sick.

The bank made a provision of A?3.2 billion to cover compensation costs.

Lloyds reported a A?3.25 billion loss for the six month period to the end of June but the results still beat market expectations.

However, the bank posted a profit of A?1.1 billion before tax and a series of one-off charges and adjustments a�� exceeding forecasts of A?961 million.

Antonio Horta-Osorio, the banka��s new chief executive, said: a�?We delivered a resilient first half performance, despite the ongoing challenges of economic and regulatory uncertainty, and have made substantial progress in restructuring and de-risking the Group.a�?

Mr Horta-Osorio assumed the role earlier this year after being poached from Spanish banking Santander.

The bank, which is 41% owned by the taxpayer, said it was on target to meet its Project Merlin commitment to lend more to small and medium-sized enterprises (SMEs).

In the six-month period, it lent A?21.2 billion – A?6.7 billion of which went to SMEs.

Under the Project Merlin deal, agreed earlier this year, the big five banks all committed to lend around A?19 billion every quarter to SMEs.

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