{"id":417864,"date":"2011-05-05T09:24:02","date_gmt":"2011-05-05T09:24:02","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/05\/05\/ppi-claims-could-cost-lloyds-3bn\/"},"modified":"2011-05-05T09:24:02","modified_gmt":"2011-05-05T09:24:02","slug":"ppi-claims-could-cost-lloyds-3bn","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/05\/05\/ppi-claims-could-cost-lloyds-3bn\/","title":{"rendered":"PPI claims could cost Lloyds \u00a33bn"},"content":{"rendered":"

5 May 2011<\/span> Last updated at<\/span> 05:24 ET<\/span><\/span><\/p>\n

Continue reading the main story<\/a> <\/p>\n

Lloyds Banking Group has announced a \u00a33.2bn provision for mis-selling claims by customers who took out payment protection insurance (PPI).<\/p>\n

Lloyds has decided to settle claims after UK banks lost a judicial review over PPI compensation last month.<\/p>\n

The move may put pressure on other banks to do the same.<\/p>\n

The PPI provision meant Lloyds made a loss of \u00a33.47bn<\/a> in the first three months of the year. It made a \u00a3721m profit a year ago.<\/p>\n

Its PPI provision was much bigger than analysts had expected and shares in the bank fell 8%.<\/p>\n

Industry hit<\/span><\/p>\n

PPI policies are supposed to repay a person’s loan if their income drops because they fall ill or lose their job. But thousands of people have received compensation because their policies were mis-sold.<\/p>\n

The Financial Services Authority (FSA) published guidelines last year which said banks should contact all past PPI customers and invite them to complain if they thought they had been mis-sold PPI.<\/p>\n

Continue reading the main story<\/a> <\/p>\n

\u201cStart Quote<\/span><\/h2>\n
\n

This [PPI provision] will be welcomed by thousands of Lloyds customers, although it will be very expensive for Lloyds \u201d<\/p>\n<\/blockquote>\n

End Quote<\/span><\/p>\n<\/div>\n

UK banks challenged those guidelines, arguing that the rules were unfair because they were retrospective.<\/p>\n

But last month a High Court judge rejected their challenge, meaning that banks could face huge compensation bills.<\/p>\n

The BBC’s business editor Robert Peston said Lloyds’ decision to settle with PPI claimants was a unilateral one, but could lead to other banks following suit.<\/p>\n

“The size of Lloyds’ charge implies that the big British banks will in total take a \u00a39bn hit to settle PPI claims,” he said.<\/p>\n

Customer claims<\/span><\/p>\n

Continue reading the main story<\/a><\/p>\n

Analysis<\/h2>\n

Ian Pollock<\/span> Personal finance reporter, BBC News<\/span><\/p>\n

\n

Lloyds’ decision on PPI could hardly be more dramatic, or more expensive for the bank.<\/p>\n

It has thrown in the towel after years in which the banking industry has denied there was much of a problem.<\/p>\n

Banks have fobbed off hundreds of thousands of complaining customers.<\/p>\n

Of course, not all PPI policies were mis-sold and some have paid out.<\/p>\n

But millions were sold, by credit card and hire purchase providers as well as banks.<\/p>\n

The FSA’s initial estimate of an industry-wide bill for mis-selling of a bit over \u00a33bn is now looking like a wild underestimate.<\/p>\n

The chances must be that the rest of the banks will finally do as they have been told by the regulators.<\/p>\n<\/div>\n

Lloyds has thousands of PPI complaints stacked up.<\/p>\n

These will now be processed, the bank says, after having been put on hold while the recent High Court case reached its conclusion.<\/p>\n

All other customers of Lloyds, including those of the former HBOS bank, are now being invited to contact the bank if they think they have a claim.<\/p>\n

At this stage it is not clear if the bank will send letters to all past PPI customers, of whom there could be several million.<\/p>\n

Nor is it revealing exactly how it has quantified the eventual cost as being \u00a33.2bn.<\/p>\n

Core growth<\/span><\/p>\n

Lloyds, which is 41%-owned by the government, also took a charge of \u00a31.1bn to allow for further falls in commercial property prices in the Irish Republic.<\/p>\n

However, the bank’s core business showed growth as customer loans and deposits rose from \u00a3842bn to \u00a3847.8bn.<\/p>\n

“The bank as a whole appears to be getting better and appears to be taking a larger market share,” said Ralph Silva, banking analyst at SRN.<\/p>\n

Before the provision for PPI compensation and other one-off items, the bank said it had made a profit in the quarter of \u00a3284m.<\/p>\n

The results were the first presented by new Lloyds chief Antonio Horta-Osorio, who replaced Eric Daniels on 1 March.<\/p>\n

‘Embarrassment’<\/span><\/p>\n

In February, Lloyds announced that it had returned to profit in 2010.<\/p>\n

It made a profit of \u00a32.21bn, having reported losses of more than \u00a36bn in both 2008 and 2009.<\/p>\n

Robert Peston said the loss in the first quarter of 2011 would be an “embarrassment” for Lloyds, given that it trumpeted its return to profit last year.<\/p>\n

But he said it was not embarrassing for Mr Horta-Osorio, who was not responsible for previous decisions and was now facing up to mistakes of the past.<\/p>\n

The new chief has already announced management changes as part of a shake-up at the bank.<\/p>\n

In June, he will reveal more details about his long-term strategy for Lloyds.<\/p>\n<\/div>\n

Continued here:
\nPPI claims could cost Lloyds \u00a33bn<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

5 May 2011 Last updated at 05:24 ET Continue reading the main story Lloyds Banking Group has announced a \u00a33.2bn provision for mis-selling claims by customers who took out payment protection insurance (PPI). Lloyds has decided to settle claims after UK banks lost a judicial review over PPI compensation last month. The move may put pressure on other banks to do the same<\/p>\n","protected":false},"author":0,"featured_media":417865,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":{"0":"post-417864","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-local-news"},"yoast_head":"\nPPI claims could cost Lloyds \u00a33bn - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2011\/05\/05\/ppi-claims-could-cost-lloyds-3bn\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"PPI claims could cost Lloyds \u00a33bn - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"5 May 2011 Last updated at 05:24 ET Continue reading the main story Lloyds Banking Group has announced a \u00a33.2bn provision for mis-selling claims by customers who took out payment protection insurance (PPI). 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