Britain’s Lloyds Banking Group has taken another one billion pound hit to compensate customers who were mis-sold insurance on loans – that’s almost 1.25 billion euros.
The charge dragged it to a loss in the third-quarter.
Before this latest provision, Britain’s biggest retail bank had already set aside the equivalent of 5.3 billion euros to repay customers who were wrongly sold payment protection insurance on mortgages and other loans.
Lloyds, which had the biggest share of the PPI market, said it still does not know how much the mis-selling scandal will eventually cost it.
The total cost of payouts for the industry could hit 15 billion pounds (18.7 billion euros) and some analysts have estimated Lloyds’ final PPI bill could rise to as much as 7.6 billion pounds (9.46 billion euros).
Lloyds reported a pretax loss of 144 million pounds (180 million euros) for the three months to the end of September, compared with a loss of 607 million (756 million euros) a year earlier. However, its underlying profit (without the PPI provisions) rose to 840 million pounds (1.04 billion euros) from 419 million (522 million euros) a year before.
Lloyds complained that around half of the PPI claims it is receiving from claims management companies (CMCs) are not valid.
The CMCs take a sizeable chunk of payouts in return for handling the paperwork for clients.
Along with other banks, Lloyds says many cases received from CMCs are erroneous and often relate to individuals who do not even have a PPI policy with the bank.
Lloyds has an army of 6,000 workers dealing with PPI complaints, of which 1,000 are working on erroneous complaints.
The banks say the invalid claims are substantially increasing their overall bill and eating up cash that could be used for lending.
Conversely the payouts are putting cash into the economy and boosting consumers’ disposable income.
The PPI scandal is only the latest instance of British banks being found to have mis-sold products, a list that also includes the sale of specialist financial products known as swaps to small business, some of whom were left with big losses rather than the protection against interest rate moves they expected.