Lloyds brings in record profits but puts aside £450 million for regulatory probe

In this Friday, June 5, 2015 file photo, a sign for the Lloyds Bank is seen at a branch in London.
In this Friday, June 5, 2015 file photo, a sign for the Lloyds Bank is seen at a branch in London. Copyright Kirsty Wigglesworth/AP
Copyright Kirsty Wigglesworth/AP
By Euronews
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The investigation by the UK's Financial Conduct Authority is looking into now-banned car finance deals.


UK bank Lloyds has reported pre-tax profits of £7.5 billion (€8.8 billion) for 2023, soaring by more than 50% from the year before.

The bank said on Thursday that changes in interest rates, which the Bank of England has been using to tackle persistent inflation in the UK, were one of the main reasons for the increase in its income.

"The Group delivered a robust financial performance, meeting our 2023 guidance, driven by income growth, cost discipline and strong asset quality," Charlie Nunn, the Lloyds Group's chief executive, said in a statement. "This performance enabled strong capital generation and increased shareholder distributions."

However, the bank's stellar results were somewhat dampened by the revelation that it has set aside £450 million to potentially settle a regulatory probe brought by the UK's Financial Conduct Authority (FCA) into certain car finance deals.

Lloyds said that the sum includes estimates for legal costs and potential compensation for people who may have paid too much for car loans.

Specifically, the FCA is looking into historic and now-banned discretionary commission arrangements, as part of a wider investigation across the motor finance market.

Some banks had allowed car dealers to raise interest rates on loans, boosting the commission they received. As such, the deals provided an incentive for car dealers to increase how much people had to pay for a car loan.

The FCA banned the practice in 2021, claiming it would save drivers £165 million a year.

The regulator has taken a particular interest in Lloyds as part of its investigation into the deals because the group's Black Horse brand is one of the UK's biggest car finance providers.

Lloyds said on Thursday that the amount it pays out as part of the FCA probe could be higher or lower than the £450 million, depending on the outcome.

It added however that it "welcomes" the FCA's intervention on the matter.

The announcement of Lloyds' financial results comes hot on the heels of those from other big UK lenders.

Barclays said on Tuesday that it would launch cost-cutting and buyback plans while HSBC revealed its pre-tax profit for the final three months of the year fell to $1 billion (€920 million) from more than $5 billion the previous year.

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