Lloyds Bank increased profits by 158% during 2016, thanks to a smaller number of payment protection insurance (PPI) claims.
The bank’s annual results for 2016 announced today show pre-tax profit increased to £4.2 billion, more than double the £1.6 billion profit recorded in 2015.
It says this is in part due to falling PPI complaints. The number of PPI claims it received fell to 8,300 a week in the second half of 2016, down from around 8,600 earlier in the year.
Meanwhile a further £1 billion was set aside for the provision of PPI claims in 2016, compared to £4 billion in 2015. Cash payouts were £2.2 billion during 2016, which was also lower than had been anticipated.
The bank says it has sold approximately 16 million PPI policies since 2000. It has now investigated, paid out or made a provision for mis-selling in 50% of those cases.
The total cost of the PPI scandal to Lloyds – including all payouts and future provisions - now stands at £17 billion.
While the number of PPI claims dealt with by Lloyds has fallen it still remains well above some of its competitors. HSBC, for example, increased its provision by £396 million during 2016, and has paid out around £3.3 billion for PPI complaints since the scandal broke.
Additionally, Lloyds Bank was forced to set aside a further £280 million for the mis-selling of packaged bank accounts. This was due to additional complaints and brings the total amount provided for this issue to £505 million.
The UK government continued to reduce its stake in the bank during the year, with its holding now below 5%.
Laith Khalaf, senior analyst at Hargreaves Lansdown, says: “PPI has really been the major factor behind the big swing in Lloyds’ profitability.
“Costs of £4 billion in 2015 compare to just £1 billion last year, and looking forward to 2017, Lloyds will be hoping it has drawn a line under the whole PPI affair, and profits will thus be unshackled from a millstone that has cost the bank dearly in recent years.”