More bad news for Lloyds. The British bank has had to set aside another 900 million pounds (1.1 billion euros) to compensate customers who were mis-sold loan insurance – known as payment protection insurance or PPI.
That is almost certainly not the end of it. Lloyds Banking Group Finance Director George Culmer told reporters on a conference call he could not rule out further increases.
Analysts at Citi said they expected Lloyds to set aside another one billion pounds (1.27 billion euros) for PPI compensation next year.
The new charge announced on Tuesday took the bank’s total cost to cover the mis-selling of PPI to 11.3 billion pounds (14.4 billion euros), more than any other bank and close to half of the total bill for the industry.
PPI policies were meant to cover repayments if customers fell ill or lost their jobs, but were often sold to people who did not need them or would be ineligible to claim.
Lloyds, which is 25 percent-owned by the British government after needing a massive bailout to avoid bankruptcy during the financial crisis of 2007-2009, also confirmed it is laying off 9,000 workers in the next three years as more people switch to online banking.
It will close 200 branches, though also open 50 new ones and spend one billion pounds (1.27 billion euros) on digital technology as part of plans to boost the amounts it lends.
Chief Executive Antonio Horta-Osorio said he expected competitors to shut more branches during the period and for Lloyds to subsequently grow its market share.
This comes just after it only narrowly passed European checks on its finances.
Lloyds, which was the worst performing British bank in the European stress tests, faces a further test by the Bank of England in December which will measure its resilience against scenarios including a 35 percent decline in house prices and a rise in interest rates to 6.0 percent.
The result of that test will be key to whether the bank is cleared by Britain’s financial regulator to pay its first dividend since it was rescued with taxpayer money.