Lloyds increases PPI payout pot by £2.1 billion

Lloyds Banking Group

The PPI (payment protection insurance) mis-selling scandal shows no sign of abating, with Lloyds Banking Group today announcing it put an extra £2.1 billion aside in the last quarter of 2015 to settle PPI claims, plus a further £837 million for other mis-selling claims. 

The partially-state-owned bank, which includes Lloyds, Halifax and Bank of Scotland, put aside a total of £4 billion to pay PPI claims in 2015, including the extra money announced today.

Overall, the bank has now allocated a whopping £16 billion for PPI claims. That’s equivalent to over £200 for every man, woman and child in the UK.

Figures published by complaints arbitrator, the Financial Ombudsman Service (FOS), earlier this week show the partially state-owned bank received 15,550 PPI claims in the second half of 2015. The Ombudsman ruled in favour of the customer in 91% of resolved cases.

As a result of mis-selling provisions, the bank’s statutory profit fell by £200 million to £1.6 billion.

Lloyds Banking Group chief executive, Antonio Horta-Osório, says: "We remain confident in our ability to become the best bank for customers and shareholders, while continuing to support the economy and helping Britain prosper.”  

If you’ve been mis-sold PPI, complain

Of the PPI claims submitted to Lloyds, 70% were made by claims management firm, and only yesterday, the National Audit Office estimated almost a quarter of PPI payouts ended up in the hands of claims handlers, worth somewhere between £3.8 billion and £5.5 billion.

But if you think you’ve been mis-sold PPI by Lloyds or any other bank, complain to the bank yourself, don’t use a claims management company that will take around 25% of your winnings. See our guide to reclaiming PPI premiums, which includes a free template letter.

If that doesn’t work, take your gripe to the free Financial Ombudsman Service. 

Rising packaged account complaints

Lloyds has also put aside a further £837 million to cover compensation for other customer issues, including packaged bank account mis-selling, which have been rising across the industry.

As with PPI, if you think you’ve been sold an inappropriate packaged account, you don’t need to pay someone to sort it out for you. Complain to your bank in writing in the first instance, and if that doesn’t work, you can contact the Financial Ombudsman Service.

Good news for shareholders

Despite these huge costs to the company, Lloyds’ share price soared 11.8% to 69.8p around midday, today boosted by rising underlying profits and an expected dividend boost.  

The board recommended a final dividend of 1.5p per share, taking the total for the year to 2.25p per share, plus a special dividend of 0.5p per share.

In light of today’s stock market movements, Lloyds Banking Group’s share price was trading 3.9% below 72.6p, which is thought to be the government’s target price before it sells its remaining shares.

The remaining shares are expected to be sold to the public at a discount – if you’re interested, see our latest update.