Lloyds bank takes extra US$1.6b hit on mis-selling
2012-11-01 17:57:12
Britain's state-rescued Lloyds bank set aside another 1.0 billion pounds ($1.6 billion, 1.2 billion euros) on Thursday to compensate clients who were mis-sold insurance, pushing it into another third-quarter loss.
Lloyds Banking Group, which is 39.6-percent owned by the taxpayer after a vast bailout at the height of the global financial crisis, said that the new provision would take its total bill for the insurance mis-selling scandal to 5.3 billion pounds.
The London-listed bank added in a results statement that it faced a net loss of £361 million in the three months to the end of September. However, that marked an improvement from a shortfall of 501 million pounds a year earlier.
Chief executive Antonio Horta-Osorio added the PPI charges were the "primary driver behind the statutory loss".
From the 5.3 billion pounds that Lloyds has set aside, the bank added that it had paid out 3.7 billion pounds at the end of September.
However, stripping out the PPI provision, the group doubled its underlying profit to a better-than-expected 840 million pounds in the third quarter, as it cut bad debts and narrowed losses from its non-core businesses.
Horta-Osorio added: "We have made further significant progress this quarter, improving underlying performance in a challenging environment, while continuing to deliver returns above the cost of equity in the core business and strengthen our already robust balance sheet."
The bailed-out group also revealed that it was ahead of schedule in its ongoing restructuring plans that were unveiled last year.
LBG has now exited 12 of the 15 countries that it had already signalled it would depart from by the end of 2014. That leaving it with current operations in 18 nations.
In addition, Lloyds has reduced its non-core assets by 31 billion pounds to 110 billion pounds, ahead of its 2012 guidance.
LBG has slashed more than 30,000 posts since 2009 as it looks to nurse its way back to health after its part-nationalisation, which was sparked by the ill-fated 2008 takeover of rival bank HBOS at the height of the financial crisis.
British banks have suffered heavy compensation bills for payment protection insurance (PPI), which provided cover for consumers should they fail to meet repayments on a credit product such as loans, mortgages or payment cards.
LBG was pushed into a vast net loss of 2.78 billion pounds in 2011 as a result of soaring claims.
PPI became controversial after it was revealed that many consumers had been sold it without understanding that the cost was being added to their loan repayments. Britain has since banned simultaneous sales of PPI and credit products.
Back in April 2011, British banks lost a high court appeal against tighter regulation of PPI.